Elizabeth McDowell doesn’t see how a recession can be avoided.

All she has to do is look at her own household. She and her spouse had planned to buy a plug-in hybrid in the next year or so, but following the president’s sweeping car tariff announcement this month, those plans are on hold.

She also wanted to replace a set of stairs at the small cottage she owns in York County.

But now, McDowell, who is 66 and lives in Falmouth, is rethinking any major purchases — she expects her money will be needed to cover the rising prices of necessities.

“Instead of doing those things, I’m going to be putting them off.”

She believes others are doing the same, and that soon, the ripple effects will take a toll on the economy. If she doesn’t buy the car, the dealer doesn’t get the business. Sales go down, employees are laid off. The employees no longer have an income and don’t spend any money, so on and so forth.

“I don’t see how it doesn’t lead to a recession,” she said.

McDowell’s concern is increasingly echoed by economic forecasters as fears of a trade war loom large. JP Morgan last week became the first bank to predict a recession. Goldman Sachs raised its odds to 45%, the second hike in a week. The stock market went haywire and on Friday wrapped up one of Wall Street’s most volatile periods on record, according to CNBC.

The rapidly changing economic landscape, rife with shifting tariffs and near-constant policy updates, is giving people whiplash and fueling uncertainty and concerns about another recession.

Whether the U.S. is in fact heading for a downturn — and how that could affect Maine — is unclear, but economists’ forecasts are getting more dour. Some have said the U.S. is already in a recession.

A little over a week ago, Paul Shea would have put the risk of a recession in the next year or two between 30% and 50%.

The day after the so-called Liberation Day, when President Donald Trump announced his latest set of tariffs, the Bates College economics professor bumped it up to 80% if the tariffs remain in place for more than a few months.

Shea’s been waiting for a market correction but said the tariffs announced were “much worse than expected.”

Most of the tariffs have since been paused for three months, except for a 145% tariff on China (as of Friday). All other countries that were subjected to reciprocal tariffs will see rates drop to the universal 10% rate. A 25% tariff also remains in place on aluminum, cars and goods from Canada and Mexico not under the United States-Mexico-Canada Agreement.

For most of last year, the economy was booming. Inflation, while not at the Federal Reserve’s 2% target, was down from the 2022 high of 9%. Unemployment was low. Consumer spending was rampant. Wages were up.

“We were just waiting for a catalyst to come along to cause households to pull back,” Shea said. “And it looks like more than the tariffs and any changes to tax policy, it’s the uncertainty about those policies” that’s slowing down growth.

CONSUMERS ARE WORRIED

Consumer sentiment fell for the third straight month in March to hit its lowest point since November 2022, according to the University of Michigan. Around two-thirds of consumers expect unemployment to rise in the next year, the highest rating since 2009, according to the university.

People are feeling shaky about the economy, but business and consumer sentiment can also become somewhat of a self-fulfilling prophecy, according to Michael Cauvel, an economics professor at the University of Southern Maine.

“So what they think is happening might matter more even than what the economists and the professional forecasters think is going to happen,” he said.

If consumers are worried the country is headed for a recession, they might worry about job security, and then be more cautious with their spending. If people are spending less, businesses will feel the hit and be less willing to hire or invest in expanding.

The U.S. Economic Uncertainty Index, which, as the name implies, tries to capture the degree of uncertainty about the economy, was almost as high in March as it was at the height of the pandemic in May 2020 and was higher than it was in any of the three prior recessions.

Economic forecasts are often slow to update, Cauvel said, but he expects that following Trump’s recent tariff changes, growth projections will worsen.

“There is more uncertainty, more risk of a recession and more risk of inflation,” he said.

‘SIGNIFICANT’ STRESS 

Ordinarily, Shea isn’t too concerned with consumer confidence.

“A lot of the time, it’s a reactive measure, in that it’s telling you what’s already happened in the economy,” he said. Households are pessimistic because the unemployment rate is rising or inflation has increased.

“We already knew that, so it doesn’t tell us a whole lot,” he said. “Consumer confidence to me is interesting when it goes down and it can’t be easily explained by inflation or unemployment.”

Craig Donnan is one of several Mainers battening down the hatches.

Donnan, 61, of Bowdoinham, expects to be looking for work in six months. A contractor for a state agency, he’s not sure what things will look like when his current contract ends, but he’s not optimistic.

He’s going to cut down on spending, increase his savings as much as possible and throw as much into his retirement fund as he can.

Donnan doesn’t separate the economy and the political environment. And he doesn’t like what he sees.

The administration’s revolving door of policy changes has created instability and overwhelm, bred uncertainty in people’s minds and created chaos, he said.

“The stress associated with that is significant and a dampening factor on my overall outlook,” he said. “I don’t feel safer, I don’t feel more comfortable, I don’t feel more confident.”

HOW WILL MAINE FARE? 

So what does that mean for Maine?

Like everything else, it’s uncertain.

No state is recession-proof, Shea said, and if the overall U.S. economy goes into a recession, Maine will likely follow suit.

There have been times when Maine bucked trends.

Since the outset of the pandemic, the state has consistently had a lower unemployment rate than the U.S. average and last year recorded stronger economic growth. And thanks to historic under-production, the state real estate market weathered the 2008 housing market crash better than states that had a glut of housing stock.

But Maine’s outlier performance hasn’t always been positive. In 2012-2013, for example, the U.S. economy wasn’t in a recession, but Maine’s economy was shrinking.

Cauvel and Shea said there are too many conflicting factors to say for sure how Maine could fare compared with the rest of the country, but it’s likely to be comparable, if only marginally better.

Maine could be hardest hit through its relationship with Canada, which is deteriorating fast.

Maine is more reliant on Canada than the rest of the U.S., with over 70% of the state’s imports last year coming from its northern neighbor compared with 13.5% nationally. The state brought in $4.4 billion of goods from Canada in 2024.

The state is also dependent on its people — about 900,000 of them, specifically.

Canadians account for about 5% of Maine’s overall tourist visits, but they are a vital piece of the market for some communities like Old Orchard Beach. State tourism officials are predicting a 25% drop in Canadian visits this year as Maine’s northern neighbors rethink their plans.

Tourism could also face headwinds if residents in other states decide to cut back on extra spending, including their summertime trips to Maine. About 80% of tourists drive to Maine.

Decreased visitation isn’t the only problem — the industry workforce, which only recently recovered from pandemic lows, could also take a hit. Maine’s tourism industry is heavily reliant on seasonal workers, largely immigrants on H-2B visas.

Maine’s ongoing labor shortage and aging workforce also means the state is increasingly dependent on the H-1B visa program for highly skilled workers in primarily STEM fields.

The future of those programs, both in federal support and workers’ comfort with visiting the country, is up in the air following the country’s recent aggressive approach to immigration.

One bright side is that Maine is comparatively less dependent on the federal workforce. Only about 1.7% of Maine workers are employed by the federal government, so from a statewide perspective, sweeping layoffs are unlikely to have as broad an impact as in Washington, D.C., and states like Virginia or Maryland, where the share ranges from 5% to 13%.

Maine is also starting in a position of comparative strength, with a strong labor market and 3.5% unemployment rate, compared with 4.2% nationally.

“I think when you aggregate this all together, maybe we do a little bit better than the country as a whole, but not much,” Shea said.

RESPONDING TO A RECESSION

If the economists are right and the U.S. does fall into recession, there’s a “pretty standard textbook response” from policymakers, Cauvel said: increase government spending, cut taxes, lower interest rates. It takes time, but it has historically been pretty effective.

“I think people also have questions about whether the government is going to be able to respond effectively in this case, and in part, that’s because we do have so much political polarization,” he said.

Typically, states that are the hardest hit will receive more federal assistance, and if Maine doesn’t fare well, that assistance could be withheld because of political differences.

“There have been some very public tensions between our governor and the president,” Cauvel said.

Whether or not the U.S. slides into a recession, Shea said it’s important to remember that not all recessions are the same.

The two-month COVID-19 recession was more like a natural disaster, he said, and the 2008 global financial crisis, which lasted nearly two years, was an extreme case.

Shea predicts that an upcoming recession would more closely resemble what followed the bursting of the “dot-com bubble” in 2000. When the internet was new, people invested tons of money into web-related companies, but when many of them failed, the stock market crashed.

It was a relatively mild, seven-month recession, during which unemployment peaked at 6.3%.

“I don’t think we’d be happy to have that right now, but you compare that to 10% in the Great Recession or 15% during COVID, obviously it’s not nearly as bad,” he said. “It’s important to note that a 10% higher unemployment rate is not normal, even for recessions.”

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