Incoming President Donald Trump and his potential policies — especially campaign threats of tariffs on imported foreign goods — create an unknown for Hawaii’s economic forecast, which the University of Hawaii Economic Research Organization otherwise expects to show modest growth through 2027.

Heading into 2025, UHERO Executive Director Carl Bonham said there remains “complete uncertainty about federal policies.”

On the campaign trail, Trump threatened 10% tariffs on all countries except for China, which would be hit with a 60% tariff, Bonham told reporters ahead of today’s release of UHERO’s latest economic forecast.

Tariffs on just specific products or materials would also affect a wide swath of Hawaii’s economy, including construction and “anybody who is selling just about anything,” Bonham said.

“The tariffs are the most likely to create risks of higher costs,” Bonham said.

Retailers could be affected by tariffs on electronics, appliances and housing and office furnishings.

Hawaii’s red-hot construction industry could be slowed by the higher cost to import building materials such as lumber and steel, Bonham said.

Most economists agree that the cost of tariffs on imported goods and materials would be passed on to consumers, adding to the already high cost of living in Hawaii.

They also think tariffs would enable U.S. manufacturers to raise costs, which also would be passed on to consumers.

It’s also unclear how Trump’s promise to crack down on illegal immigration would affect Hawaii employers who hire illegal immigrants, along with the potential impact on foreigners in the future who may not travel to Hawaii to work, Bonham said.

Other Trump pledges to cut federal employment could negatively affect local economies around Hawaii military bases, such as Kaneohe (Marine Corps Base Hawaii) and Wahiawa (Schofield Barracks and Wheeler Army Air Field), Bonham said.

With so many unknowns about the effects of Trump administration policies, Bonham said, “there’s plenty of risk to go around.”

Growing payouts and risks to the insurance industry already are driving up rates in Hawaii, increasing housing costs and slowing sales, especially for condos, Bonham said.

Hawaii and especially Maui, as it continues to recover from the 2023 wildfires, are hardly alone in seeing insurance companies leave markets and increases around the world.

“The insurance companies are reevaluating their risk,” Bonham said.

“Housing affordability continues to deteriorate,” UHERO said in its summary. “The median price of a single-family home is up 9% statewide and 15% on Maui this year, and mortgage rates hover near 7%. Rising homeowner insurance premiums, driven in part by climate risks, are another headwind to housing affordability and housing market recovery. These challenges are compounded by slow progress in addressing Maui’s post-fire housing needs.”

The overall outlook for economic growth for Hawaii remains mixed, overall, even without the impact of Trump policies.

Tourism should grow by 3% in 2025 — especially from mainland visitors — and local residents will benefit from historic tax cuts passed by the Legislature in 2023 and signed by Gov. Josh Green, UHERO said.

But inflation is expected to continue growing while “home affordability woes continue,” UHERO said.

The weakness of the yen will continue to suppress Japanese travelers, and Bonham and UHERO remain pessimistic about a resurgence of visitors from Japan despite signs of optimism including a record number of runners in the Honolulu Marathon and its sister races and Daniel K. Inouye International Airport’s new inclusion in the U.S. Customs and Border Protection’s Global Entry program that cuts hours off of the time Japanese tourists have to spend in the airport.

Hawaii job growth grew by just over 0.5% this year overall and was not experienced equally among different islands.

Growth in the Oahu and Hawaii island labor markets outpaced Kauai and Maui, which continues to struggle. Maui still has only half the number of jobs compared with before the fires, UHERO said.

Hopes for long-term job growth “will be limited by an aging population and a slow-growing labor force,” UHERO said.