Beachgoers walk down the sidewalk in Old Orchard Beach in 2021. Brianna Soukup/Portland Press Herald

Maine economists are preparing for an economic slowdown as they grapple with the uncertainty caused by the Trump administration’s tariff threats and ongoing efforts to slash federal spending, including grants received by governments, nonprofits, and educational and research institutions.

On Monday, while holding its first meeting since Trump took office, the state’s Consensus Economic Forecasting Commission downgraded its forecast of personal income growth and increased projections of inflation.

It’s unclear how the forecast will affect state revenue projections, which will shape budget discussions in the Legislature in the coming weeks.

The key word throughout the nearly three-hour forecasting meeting Monday was “uncertainty” as the economic impacts of Trump’s burgeoning trade wars and other rapid policy shifts continue to play out. Among other concerns, Trump’s targeting of Canada could have a significant impact on Maine, which has strong economic and cultural ties to its northern neighbor, ranging from energy imports to tourism.

“There’s just tremendous uncertainty,” said Sheena Bunnell, an economics professor at the University of Maine Farmington who chairs the commission. “These are just shocks to the system that I guess some may have anticipated it and some may not have.”

The commission is expected to finalize its forecast in the coming days and present it to the Legislature’s budget-writing committee on Friday.

The report is a key component of the state’s spring revenue forecast that will set the stage for negotiations over the next several weeks to finalize a new two-year state budget. Taking cues from forecasts from Standard & Poor’s and Moody’s, state economist Amanda Rector said officials expect a period of increasing unemployment and economic growth that is below its potential, which S&P has dubbed a “growth recession.”

“It’s not a true recession,” Rector said. “(The economy’s) still growing. It’s just growing slower.”

Gaming out the economic impact of Trump’s policies has proven to be difficult. Trump has threatened tariffs, only to rescind them and then threaten more. He has sought to cut off federal funding and slash the federal workforce, only to reverse course because of political pressure or court orders.

And Republicans, who control the White House, U.S. Senate and House of Representatives, have yet to coalesce around a federal budget plan that could extend Trump’s previous tax cuts and possibly include significant cuts, including to Medicaid.

Each of these moves — and their final disposition — could have a significant impact on Maine, which has strong economic ties to Canada and a high reliance on federal funding.

“There’s a lot of cross-border movement,” said Megan Bailey, a senior economic analyst for the state. “Any sort of tariffs on our end and Canada’s end, back-and-forth, can raise prices significantly.”

Adding to the variables is Trump’s feud with Gov. Janet Mills, which began when Trump demanded Maine change a state policy regarding transgender high school athletes.

The administration has launched several investigations into Maine and threatened to withhold federal funding until Maine prohibits transgender girls from participating in women’s sports, something Mills says can’t be done unless lawmakers change the Maine Human Rights Acts, which prohibits discrimination based on gender identity.

Chuck Lawton, a retired economist who serves on the commission, questioned the impact on Maine’s relationship with Canada, and “the animus of our president towards our governor” and whether that could lead to defunding infrastructure projects, like the rebuilding of seawalls in York.

“There’s the big question: Is Maine in the bull’s-eye of a target?” Lawton asked.

In the last two months, Trump has already placed placed 10% tariffs on products from China, 25% tariffs on goods from Mexico and Canada that aren’t covered by the United State-Mexico-Canada Agreement and 25% tariffs on all steel and aluminum imports.

Trump has said he plans to enact another round of tariffs on Wednesday that could include a 25% tariff on finished vehicle imports as well as unspecified retaliatory and agricultural tariffs.

Commissioner Ryan Low, the chief financial officer for the University of Maine System, said the group’s forecast should underscore the uncertainty of federal policies and their impact on Maine.

“We’ve said it for every agenda item,” Low said. “We need some giant ‘uncertainty’ slide that says that everything we say may be completely irrelevant and out of date tomorrow. Maybe (it’s) not quite that bad, but that’s what it feels like.”

State officials noted that Maine receives 80% of its home heating fuel and gasoline from Canada and 60,000 Mainers get their electricity through the Canadian grid. And tensions between the countries has already caused 30,000 fewer people to cross into Maine in February compared to the previous year and 14,000 fewer passenger vehicle entries.

The impact of federal funding and grants also weighed on the commission.

Maine received $4.3 billion in federal grants in 2023, with $2.8 billion going to Medicaid. The rest went toward income security and social services (32%), transportation (27%), education (14%), and energy, environment and natural resources (13%), among other things.

Rector said the lack of clarity and consistency from the administration has made it difficult to pinpoint the impacts of losing federal grant funding on the economy.

“It’s incredibly difficult to even figure out what pieces are changing from day to day, because everything is changing so rapidly,” Rector said. “And (it’s) not just changing but sort of doing yo-yos where you think you know something has changed and maybe it hasn’t changed, or maybe it has changed but in a slightly different away.

“There are going to be really significant effects not just from the actual federal spending and the multipliers of that but also from the uncertainty that goes with not knowing about the federal spending.”