I'm also having to deal with this, but in an adult Sheltie. It takes time and a LOT of patience!
My Bela started out a couple of months ago being afraid of everything. She spent the first five years of her life in a small cage as a puppy mill mama. When I brought her home from her foster mom's, the only thing she knew was her house training (which is surprisingly rock solid). She'd had absolutely no experience in being a house dog - in consequence, she was afraid of everything, but especially noises.
It's taken a while, but I've noted what most disturbs her when walking outside: lawn mowers, dogs barking in the distance, construction noises, loud ATVs and motorcycles, garage door openers, and probably a whole slew of other things.
I had to begin by almost literally dragging her down the street. After a couple of days, she began to trust me enough to walk slowly down the street if it's generally quiet. We live in a fairly rural area, but in a large development with lots of neighbors, so it tends to be a little noisy. Most of the neighbors are at work during the mid-day, so that's when we walk down to the horse farm at the end of the road. But if there happens to be anything too loud, I still have to either carry her (and she's a little to heavy for me with my spine problems) or walk REALLY FAST back to the house.
A Thundershirt has really helped out a lot with some of her fearfulness, but in the 100+ degree weather we've been having, it's just too hot to put a tight little jacket on her just to go on a wallk.
Currently owned by Lady Bela Signorina (Bela) 2006 - rescued 2011
Previously owned by BJ's Laughing Kachina (Neechee) 1993-2010