Walters: California’s economy was already sluggish before Trump’s global tariffs
Last week, Gov. Gavin Newsom and Attorney General Rob Bonta filed a lawsuit challenging the legality of President Donald Trump’s broad imposition of tariffs on imported goods.
“President Trump’s unlawful tariffs are wreaking chaos on California families, businesses, and our economy, driving up prices and threatening jobs,” Newsom said in a statement.
The tariffs could have all of those negative impacts, but California’s economy was already sluggish.
As Gabe Petek, the Legislature’s budget analyst, said in a January response to Newsom’s state revenue forecast, “These gains are not tied to improvements in the state’s broader economy, which has been lackluster, with elevated unemployment, a stagnant job market outside of government and healthcare, and sluggish consumer spending.”
California has more than a million unemployed workers and its unemployment rate is tied for second-highest among the states.
“Jobs growth remains concentrated in government and government supported health care and social services while other private industries in total continue to shed jobs,” according to the Center for Jobs and the Economy, an arm of the California Business Roundtable trade group.
Virtually every major segment of California’s economy has been facing stiff headwinds in recent years, but the only one enjoying political notice has been Southern California’s film industry, which is seeing other states and nations lure production away with lower costs and subsidies.
“Those business decisions have considerable consequences for the industry’s thousands of middle-class workers: the camera operators, set decorators and lighting technicians who make movies and television happen,” the New York Times reported.
Newsom and the Legislature are planning a major increase in state subsidies to keep production in California, but it may be too little and too late.
Meanwhile, “The substantial loss of technology jobs in the Bay Area so far this year is a huge shock to the Bay Area economy and labor market,” Scott Anderson, chief economist with BMO Capital Markets, recently told the East Bay Times and The Mercury News. “The technology job loss trend has been in place for some time now, but the deterioration in the first two months of the year is concerning.”
Tariffs could hit Southern California’s most important economic driver — the twin ports of Long Beach and Los Angeles and the warehouse complexes in the region’s interior — especially hard. But this sector was already facing rising costs that undercut its competitiveness.
The Goods Movement Alliance, a coalition of business groups, is backing Newsom’s challenge to tariffs, but also cites the state’s policies, industrial electricity rates twice the national average and high gasoline and diesel fuel prices as negative factors, as well as new pollution controls on ships and anti-warehousing legislation.
California’s largest-in-the-nation agricultural industry, including its famous winemaking sector, is also shrinking, largely due to uncertain water supplies, labor shortages and the same high costs for electricity and fuel that the logistics industry faces.
The Public Policy Institute of California has estimated that, “even in the best-case scenario, some 500,000 acres may need to be fallowed in the San Joaquin Valley” due to restrictions on pumping irrigation water from underground aquifers.
Finally, even though government has been California’s foremost employment driver — including government-financed medical services — in recent years, it is also facing bleak times. The state budget is mired in what fiscal experts call a “structural deficit” and virtually every major city, some counties and large school districts are in the same pickle. Los Angeles and San Francisco are particularly plagued after several years of of overspending and their leaders, such as Los Angeles Mayor Karen Bass, are warning that layoffs may be inevitable.
Trump’s tariffs might make things worse, but California’s economic woes predate Trump. Much of it was self-inflicted.
Dan Walters is a CalMatters columnist.