Sacramento – As the stock market plunged last week, California Congress Speaker Robert Rivas sat on the table in the state capitol and predicted President Trump’s tariffs would “squeeze our economy at every level.”
“When I’m on the budget for the Legislative period, it’s certainly the most challenging years. There will be some tough choices in the future,” Hollister’s Democrat foresees. “But, with so much uncertainty, it’s hard to solve this problem at the moment. It’s different every day.”
Less than 48 hours later, Trump suspended most of his tariffs on imported goods. California’s progressive tax structure depends on California’s financial markets Response Before bounce up and down the rest of the week.
The whip highlighted the challenges of lawmakers and Gavin Newsom this spring, who tried to develop a national budget plan for the coming year to fund schools, healthcare, roads and other essential services.
Each state budget is based on forecasts of state and federal economic conditions that will affect tax revenues over the next 12 months. Income taxes for income people with super-large income taxes in California are often associated with the rewards they receive from the stock market, making the state particularly vulnerable to the booms and busts of Wall Street.
Trump’s trade policy is unstable and threatens to withhold federal funds from California, Public Health Funding Support the schoolmaking forecast income more unstable than usual.
Tariffs and in-kind retaliation from other countries will undoubtedly hurt California, from new surcharges for almond exports to deflate Silicon Valley tech stocks.
Predicting whether additional tariffs will take effect, the potential impact depends less on understanding of U.S. economic policy and more on the president’s psychology.
This challenges Newsom Administration, which is currently trying to develop its economic forecast for the budget annually that begins in July. These estimates will serve as the cornerstone of the revised national budget plan proposed by the governor to the Democratic-led legislature next month.
Before negotiations on final spending plans even begin, Rivas has warned that the budget passed before the June deadline may require significant changes before the legislature is adjourned sometime in the late summer or fall.
“We haven’t seen any changes in Washington’s economic policy before,” said Jerry Nickelsburg, a senior economist at UCLA anderson forecast.
“It’s hard to predict, but predict what the executive and legislative departments have to do, so the appropriate way to solve this problem is more conservative than what objective data tells you.”
Trump imposes 10% tariffs on cars and auto parts worldwide and 25% tariffs. Locking in the trade war with China, He raised the tax rate on Chinese imports to 145%while China raises tariffs on U.S. goods to 84%. Trump suspended additional tariffs on 90-day goods imported from other countries, citing his desire to negotiate.
HD Palmer, a spokesman for the California Treasury Department, said that at least today, at least as of today, the impact on tariffs that remain on international countries and China will be considered, given the state’s latest economic forecasts for the 2025-26 economy forecast.
However, it is difficult to establish revenue forecasts around tariffs that may or may not be negotiated.
“We try to wait as much as we can because things change every day,” said Somjita Mitra, chief economist at the Ministry of Finance. “So we are trying to see as much information as possible.”
The initial budget proposal in Newsom announced in January that the governor labeled “uncertainty about federal policy” as “the most direct risk of forecasting.” The state will lose income due to sales and use taxes, personal income taxes and corporate taxes.
The budget says Trump’s tariff proposal raises prices for consumers and businesses of daily and basic goods, which has the potential to lead to higher inflation, reduced spending and reduced sales tax revenue in California.
Palmer notes that the state is also particularly vulnerable to stock market damage, as the top 1% of income tax filings typically account for 40% of all personal income taxes paid by California. Their income comes primarily from capital gains and stock market choices, or bonuses paid based on stock performance.
“When the market is doing well, they are in good shape, so we are doing well in revenue,” Palmer said. “In contrast, when the market tanks and they are not doing well, we are not doing well.”
The U.S. “The Seven” technology stocks belong to California companies such as Apple and NVIDIA. These companies play a greater role in California’s capital gains than in other parts of the country, making the state more vulnerable to the stock market.
Mitra noted that if other countries raise tariffs on goods exported by Trump, California’s agricultural industry, especially the almond and pistachio producers that provide most of the world market, could be hurt. If global trade declines, ports in Los Angeles, Long Beach and Oakland will lose their logistics.
Tensions with other countries may also be Reduce travel and travel to CaliforniaPalmer said that it affects hotels, theme parks and restaurants. China’s decision this week Reduce the number of movies released in the United States Will hurt Hollywood owners studios.
Even before the heavy tariffs were imposed, uncertainty in Washington had already affected California’s revenues, Knicksburg said.
Volatility in the stock market often reduces IPO exercises and stock options, two important sources of capital gains to increase national income. The housing market, another origin of capital gains, could also be hit because if people are not satisfied with the economy, they will hesitate to buy a home.
The impact of tariffs is only one source of potential financial problems in California.
Since Trump took office Policy on Parent Notices on Gender Changes in Students and Deliver diversity, equity and inclusion programs in schools.
Many attempts to cut funds, such as government efforts $200 million in federal funds for academic recovery After the pandemic, lawsuits continued to be filed in court. This has sent California another huge budget uncertainty.
“California has to step up its efforts because the federal government has taken the carpet out of all our plans, all our social safety nets,” the parliamentary fundraiser said in a debate this week.
Republicans at the State Capitol were quick to remind Democrats that not all fiscal challenges in California were proposed by Trump.
Legislature passed a bill Thursday requiring an additional $11.1 billion in state and federal funding Medi-Cal cover cost overrunBy the end of the fiscal year, a health care plan for low-income Californians.
A large portion of the unexpected costs come from the expansion of the state’s Medicare coverage to all immigrants, regardless of legal residency. While Newsom is committed to maintaining the plan this year, cuts may be made in negotiations in next year’s budget.
The governor’s January budget proposal has been put before considering the impact of cuts and tariffs Rely on $7.1 billion from the Rainy Day Fund Pay the state plan.
“Only politically, you’re not doing well and then trying to blame others,” said state Sen. Tony Strickland (R-Huntington Beach).
Strickland said the state should consider adopting policies to increase manufacturing and production to reduce dependence on foreign suppliers as the threat of tariffs is pending on California’s budget and economy. He summoned the state’s dependence on Canadian timber and oil and gas from overseas.
