California Governor Gavin Newsom is directing his administration to explore expanded trade opportunities with international partners in an effort to navigate new import tariffs announced by President Donald Trump. Newsom emphasized California’s readiness to engage directly with global trading partners, stating on social media, “California is here and ready to talk.”
This move comes amid concerns that Trump’s tariffs, and potential retaliatory actions from other countries, could significantly harm California’s economy. As the world’s fifth-largest economy and a major player in U.S. trade (over $675 billion in two-way trade), California is particularly vulnerable to trade disruptions.
The New Tariffs and Immediate Fallout
The White House recently imposed a 10% baseline tariff on all imports, with significantly higher rates on goods from major trading partners like China (34%), the European Union (20%), Japan (24%), South Korea (25%), and Taiwan (32%). While Mexico and Canada are exempt from these new tariffs, previous 25% tariffs imposed last month remain.
The announcement triggered market instability, with Wall Street experiencing its most significant drop since 2020. China quickly responded with its own 34% retaliatory tariff, signaling the potential start of a broader trade war, with other nations considering similar measures.
California’s Concerns and Strategy
Governor Newsom’s administration is reportedly pursuing “strategic” relationships, urging countries imposing retaliatory tariffs to exempt products originating from California. The administration fears significant impacts on key state industries, including agriculture, manufacturing, and overall trade logistics.
Specific concerns include:
- Agriculture: The vital almond industry ($4.7 billion in 2022 exports) could face losses up to $875 million due to retaliatory tariffs from major buyers like China, India, and the EU. Increased costs for imported goods like Mexican avocados or Canadian canola (used in cattle feed) could also raise consumer prices for avocados and milk. The wine industry faces potential price hikes due to tariffs on European competitors and increased costs for imported materials like corks and glass.
- Manufacturing: California’s large manufacturing sector, particularly in Los Angeles (over 313,000 jobs), could suffer from reduced imports and exports, impacting jobs at ports and throughout supply chains. Key exports like computer/electronic products ($47.9B) and machinery ($18.4B) are vulnerable.
- Supply Chains: Disruptions between California and Baja California are anticipated, as taxing goods crossing the border multiple times during production could increase final costs.
- Rebuilding Efforts: Tariffs on materials like Canadian lumber could hinder access to essential supplies needed for rebuilding after events like the Los Angeles wildfires.
The White House dismissed Newsom’s efforts, with a spokesperson suggesting the governor should focus on domestic issues like homelessness and crime rather than “international dealmaking.”
Expert Analysis and Economic Outlook
Experts are skeptical about the effectiveness of Newsom’s approach. Daniel Sumner, an agricultural economics professor at UC Davis, noted that California, not being a sovereign nation, cannot be directly targeted. Retaliatory tariffs are typically aimed politically; Sumner suggests countries might target goods from Trump-supporting states (like soybeans or pork) rather than Californian products (like wine or walnuts), especially since California holds less political sway in Washington currently compared to when Democrats previously held power. He also warned of potential federal backlash against California. “Overall, it is hard to see much coming from this,” Sumner concluded.
Economists project significant inflationary pressure from the tariffs. Analysis by the Yale Budget Lab estimates they could increase overall inflation by 2.3% this year, including a 2.8% rise in food prices and an 8.4% jump in auto prices, potentially costing the average American household around $3,800.
Despite these concerns, President Trump expressed optimism, predicting the tariffs would lead to an economic boom and represent America’s “declaration of economic independence.”
The new tariffs are scheduled to take effect shortly, with the administration aiming to keep them in place until the U.S. reduces its significant trade imbalance.