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As the United States and Great Britain approached the 1820s, mercantilism was starting to disintegrate. With reciprocity, the world was adopting a new approach to trade – a free trade/capitalist approach. In the United States, this policy change moved America from an era of restricted trade and embargoes into an age of reciprocal trade agreements. (Reciprocity allowed for preferred trading relationships that benefitted each country involved in a reciprocal trade agreement).  

Starting in the mid-1820s and through the 1840s, economic liberals in Europe began to oppose British government intervention in the free market. Economic liberalism (eventually “capitalism”) promoted the view that over-regulation by governments inhibited free trade and open competition. This view was the start of the decline of mercantilism. 

As the United States and Great Britain engaged in reciprocity, the need to smuggle goods along Passamaquoddy Bay declined (because the trade barriers for those goods had been removed). Accordingly, Eastport’s position as an important shipping hub began to fade. Traders now bypassed Eastport, going directly to cities with larger populations and bigger markets.

In 1825, President John Quincy Adams recommended extending reciprocity to all countries willing to do the same for the United States. The Central American Federation was the next to sign–up for U.S. reciprocity. To make trade even easier, Congress gave the president the power to offer reciprocity to any government willing to trade on an equal footing with the United States (the Marine Reciprocity Act of 1828). 

In 1833, Eastport became the second busiest port for shipping in the United States, behind only New York City in total shipment volumes/ship arrivals. In 1833, 39 American vessels served Eastport (capacity of almost 4,000 tons), while 1,784 foreign vessels arrived at Eastport (with nearly 109,000 tons of capacity – most coming from Liverpool, England, and the West Indies). 

The boon in Eastport shipping would turn to bust in the 1840s as shippers found other U.S. ports more convenient for their needs. In 1844, shipping had declined significantly, with 139 American vessels visiting Eastport harbor (with 7,333 tons of capacity) and only five foreign vessels (with around 950 tons of capacity). 

Fortunately, at this point, shipping was not Eastport's only industry. As the shipping industry declined, the shipbuilding industry inclined. Eastport was to take on a new identity – that of a shipbuilding community.  Decades after the first ships had been built at Eastport, between 1818 and 1830, twenty-one ships had been built at shipyards in the town, averaging 105 tons in capacity. Over the next several decades, Eastport would build hundreds more.

Financial panics created temporary economic setbacks in the region. During the Panic of 1832, several banks in Calais failed after loaning money to buyers purchasing lumber lands (the bottom fell out in the lumber market at this time). The Panic of 1837 resulted from printing too many banknotes without hard currency backing them up.  1839 brought the next downturn – one that lasted four years. 1845 brought a mild recession, the 1853 recession, and the Panic of 1857 (a panic that wiped out many shipbuilders in Washington County). The Panic of 1857 happened when U.S. banks overextended themselves by loaning money to railroads (which then defaulted). These panics crippled businesses in the United States, hampered trade and caused unemployment to rise (even in Washington County).

On July 6th, 1839, Eastport's first great fire started in "Building Number 9" at the foot of Boynton Street – and swept south along Water Street to Paine's Wharf. Perhaps half of the town and two ships (the Abigal and the Martha) were burned in this fire. The town of Eastport spent the next year rebuilding the downtown area – again using wood as the primary building material.

A second major fire struck Eastport on October 23, 1864, burning almost all of downtown Eastport's wooden shops and buildings to the ground. The town again rebuilt, choosing to use wood as a building material. This fire had broken-out at around 1:30 a.m. – and burned until 8 a.m. the following morning. When it was finally extinguished, it had consumed approximately fifty businesses. 

On October 4-5, 1869, Eastport was struck by the "Saxby Gale," a rare tropical cyclone crossing the Bay of Fundy and Passamaquoddy Bay. The gale force was tremendous, destroying stores, wharves, fish houses while beaching ships. 

It is known that Eastport served as one of the stops along the way (according to the Maine Historical Society, Eastport, as the final stop in America along the east coast, was highly likely to have hosted fugitive enslaved people). Safe houses could also be found in Portland, Brunswick, Vassalboro, Augusta, Auburn, Biddeford, Orono, and Fort Fairfield. Routes in Maine ran northward from South Paris and Lovell; others ran to Effingham, North Parsonsfield and Porter; and others ran up the coast. 

Men from Maine played a pivotal role in the Civil War at the Battle of Gettysburg (one of the war's bloodiest engagements). On July 2, 1863, Colonel Joshua Lawrence Chamberlain, commander of the 20th Maine, and his 385 men were ordered to defend the far-left position of the defensive line of the Army of the Potomac during the battle. Running low on ammunition and at risk of being overwhelmed by the Alabama Brigade of General Hood's Division, Chamberlain and his men used a sweeping gate maneuver (and, due to an ammunition shortage, were forced to use bayonets) to turn back the attacking Confederate force. The Mainers suffered heavy losses (29 killed, 91 wounded, and five missing) but won the day and helped the Union Army avoid a complete disaster by repelling the Confederate flanking move.

In the 1850s and 1860s, a small group of revolutionaries, "The Irish Republican Brotherhood," organized to reject British rule in Ireland forcibly. These revolutionaries believed in two fundamentals: 1) Ireland belonged to the Irish and should be reclaimed; 2) Ireland would need to be taken by force from the British occupiers. On April 13th, 1866, a group of about 30-40 men of Irish heritage arrived at Eastport on the steamer New York. The men quickly dispersed, finding lodging in Eastport boarding houses, hotels, and even a few private homes. The federal government sent Civil War General George Meade to halt a Fenian invasion of New Brunswick. The Fenians, still in need of armaments, decided to move inland toward Vermont and New York, where firearms would finally be supplied. Eventually, they went to Ridgeway, Ontario, launching a raid there. Seven hundred were captured, and the Fenian situation was finally diffused in June 1866.

The Passamaquoddy questioned the right of their chiefs to tenure (some wanted to curtail lifetime appointments, others wanted lifetime tenure to continue). This schism created groups that believed in the old ways of tribal rule (the "Old Party") and those who wished for a new model (the "New Party"). This schism would last for over twenty years, during which time tribal governments collapsed and the State of Maine moved in, through its Department of Indian Affairs, to exert control.