Amid “broad uncertainty” posed by the incoming Trump Administration, Hawaii can expect a short-term economic boost followed by supply challenges and an eventual uptick inflation, according to the latest economic forecast by the University of Hawaii Economic Research Organization.

What You Need To Know

  • Nationally, UHERO projects that the Tax Cuts and Jobs Act will be extended and the corporate tax rate will be reduced while tariff hikes will be more limited and targeted than some expect, resulting in a 5% increase in the effective tariff rate, with other countries responding with similar hikes.
  • Locally, UHERO forecasts that Hawaii tourism will show modest improvement in the coming year, with visitor arrivals growing nearly 3%
  • While visitors from the U.S. mainland will increase due in part to federal tax cuts, trade tensions and a strong dollar may cause international arrivals to suffer. The organization expects tourism revenue to be constrained by stagnant per-person spending
  • The report notes that should trade and immigration policies be harsher than UHERO projects, there could be “broader negative fallout” in Hawaii

 

Nationally, UHERO projects that the Tax Cuts and Jobs Act will be extended and the corporate tax rate will be reduced while tariff hikes will be more limited and targeted than some expect, resulting in a 5% increase in the effective tariff rate, with other countries responding with similar hikes.

“The policies as a whole will provide a moderate near-term U.S. economic boost but will result in higher inflation and slower growth in the medium term,” the report stated.

Locally, UHERO forecasts that Hawaii tourism will show modest improvement in the coming year, with visitor arrivals growing nearly 3%. While visitors from the U.S. mainland will increase due in part to federal tax cuts, trade tensions and a strong dollar may cause international arrivals to suffer. The organization expects tourism revenue to be constrained by stagnant per-person spending.

UHERO notes that the state’s overall labor market has softened and job gains have been uneven across counties, with Oahu and Hawaii Island outpacing Maui and Kauai.

“With the direct negative wildfire effects now behind us, Maui job growth will turn upward in 2025 while labor market gains will slow statewide,” the report stated. “Long-term job growth will be limited by an aging population and a slow-growing labor force.”

Projections for the affordable housing market remain bleak, with the median price of a single-family home up 9% statewide (15% on Maui) and mortgage rates hovering around 7%.

“Rising homeowner insurance premiums, driven in part by climate risks, are another headwind to housing affordability and housing market recovery,” the report stated. “These challenges are compounded by slow progress in addressing Maui’s post-fire housing needs.”

UHERO also projects inflation will continue to affect individual and household spending power.

“While a slight moderation is expected in 2025, higher U.S. tariffs and deportation actions will push inflation higher in the medium term, eroding to some extent real income gains for households,” the report stated.

The report notes that should trade and immigration policies be harsher than UHERO projects, there could be “broader negative fallout” in Hawaii.

Michael Tsai covers local and state politics for Spectrum News Hawaii. He can be reached at michael.tsai@charter.com.