A leading Hawai’i economist on Monday predicted stronger growth for the state economy this year than last year, but said the policies of President-elect Donald Trump raise economic uncertainties that could cause problems for the local economy in the years ahead.

Carl Bonham, executive director of the University of Hawaiʻi Economic Research Organization, said it is unclear how many of Trump’s campaign promises will become reality. But in a briefing for the House Finance Committee on Monday, Bonham said the combination of broad tariffs and significant numbers of deportations “lend themselves to a world where inflation is higher than it would have been otherwise.”

That’s in a state that already has one of the high inflation rates in the nation.

It could pressure the Federal Reserve to keep interest rates higher than many economists expected to try to control inflation, and the combination of those factors “creates some headwinds for Hawaiʻi,” he said.

The near-term overall outlook for Hawaiʻi is “pretty decent,” Bonham said, with the university’s Economic Research Organization projecting in its latest quarterly report that visitor arrivals will increase by 3% this year. He also cited the continuing recovery of tourism, and a building industry that has created a record number of construction jobs.

“Longer term, and by longer term I mean ’26, ’27, and ’28 and beyond, our outlook is pretty sanguine and nothing to get excited about,” Bonham said. He added: “I wouldn’t call it bleak” but he said Hawai’i’s demographic trends remain a concern as local birth rates drop and more people leave the state.

State Economist Eugene Tian said Hawai’i’s labor force in the third quarter of last year had about 15,000 fewer workers than in the third quarter of 2019.

Nationally, UHERO is projecting the U.S. gross domestic product will decline from about 3% last year to as low as 1% in 2026 and 2027, mostly because of the impact of tariffs and immigration policy.

That would likely affect tourism, Bonham said, because “basically, in today’s visitor industry, where the U.S. goes, that’s where the industry goes.”

Bonham said the “highest probability” is that the U.S. Congress will extend the Tax Cuts and Jobs Act provisions scheduled to expire this year, but other tax cuts Trump proposed or promised during the campaign are “very much up in the air.”

“My guess is we will not see — and when we did our forecast, we did not assume — that we would get all the other tax cuts that were discussed on the campaign trail,” Bonham said.

Trump’s tax proposals during the campaign include eliminating taxes on tips and overtime, and eliminating taxes on Social Security benefits.