How Donald Trump's Tariffs Will Impact California

President Donald Trump's new tariffs are expected to hit California hard, with experts warning that they could cause food prices to rise.

Why It Matters

California is the fifth-largest economy in the world, making it a vital engine for U.S. economic growth. The Golden State is also the largest importer and second-largest exporter among U.S. states, with more than $675 billion in two-way trade.

So Trump's tariffs could have outsized consequences, potentially driving up costs for California businesses, disrupting global supply chains and putting pressure on key industries in the state.

What To Know

After Trump's "Liberation Day" announcement on Wednesday, California is bracing for the impact of the new tariffs.

The White House on Wednesday imposed a 10 percent baseline tariff on all imports, including those from U.S. allies and non-economically active regions, along with higher rates for countries with large trade surpluses with the U.S.

The tariffs include a 34 percent tax on imports from China, 20 percent from the European Union, 25 percent from South Korea, 24 percent from Japan and 32 percent from Taiwan. Mexico and Canada, from which most U.S. produce imports come, are exempt from Trump's latest tariffs, but the 25 percent tariffs that he levied on both countries last month will remain.

Trump's announcement sent the markets into turmoil on Thursday, with Wall Street recording its worst day since 2020, when COVID-19 was in full swing. Meanwhile, China hit back with a 34 percent retaliatory tariff on Friday, in the first signs of an all-out trade war that could cripple imports and exports. Other nations are mulling retaliatory tariffs.

Amid the turmoil, economists fear the impact of the tariffs on California's economy. In 2024, trade in physical goods accounted for nearly 16 percent of California's GDP—about $675 billion—according to the Public Policy Institute of California.

Manufactured products such as computer equipment, semiconductors, instruments and aerospace goods made up 87 percent of the state's exports, while agriculture, including nuts, fruits and vegetables, contributed 8 percent. California sent 37 percent of its exports to Canada, Mexico and China, and imported 41 percent of its goods from those countries.

As California recovers from January's wildfires, it is particularly reliant on imports like lumber, steel and appliances.

University of Southern California professor Jonathan Aronson warned that as a result of the tariffs, California will likely see reduced imports and therefore higher prices.

"In 2024, California was the largest importer of goods—$509 billion, close to 30 percent from China," he told Newsweek. Texas was second with $384 billion of imports. The tariffs will likely cut down imports and raise prices in both states."

One area that will be hit hard in particular is food prices, according to Daniel Sumner, an agricultural and resource economics professor at UC Davis.

"Higher prices partly reflect tariffs on food imports ranging from avocados to spinach, depending on the season," he told Newsweek. "Higher U.S. food prices will also be driven by tariffs on the farm inputs which raise costs for farmers and hit their profits."

Retaliatory tariffs on U.S. goods are expected to hit California's agriculture sector hard, especially its almond industry, the state's top export crop, according to the San Francisco Chronicle.

Almond exports, valued at $4.7 billion in 2022, support 110,000 jobs and contribute $9.2 billion to California's GDP. With more than 76 percent of the world's almonds grown in California and three-quarters exported globally, any trade restrictions could significantly impact revenues—potentially costing the industry up to $875 million, per a UC Davis study.

The tariffs could also drive up U.S. food prices, including avocados and milk. Currently, 90 percent of avocados consumed in the U.S. are imported from Mexico, making them affordable and widely consumed, while only 10 percent are grown in California. But If Mexican imports are restricted, prices will rise and consumption will drop, Sumner told the San Francisco Chronicle.

Sumner also noted potential indirect effects on California milk prices. Most California cows are fed canola from Alberta, Canada, rather than local soybeans like in Wisconsin. If tariffs force a switch to more distant soybean sources, milk production costs—and thus milk prices—could increase, he said.

Meanwhile, the wine industry in California could also take a hit. Tariffs on European wines could prompt California winemakers to raise their prices to stay competitive. Additionally, many California alcohol producers depend on materials such as corks, glass and capsules imported from Mexico and Canada—raising the possibility of further price increases if those goods become more expensive.

Another possible impact of Trump's tariffs in California is the loss of jobs in the state, which employs hundreds of thousands of people in the manufacturing industry.

Manufacturers in Los Angeles employed an estimated 313,000 workers last year, making it a leading sector in the county's nearly $1-trillion economy, according to the LAEDC.

But economist Jock O'Connell, international trade adviser at L.A.'s Beacon Economics, told the Los Angeles Times that there could be fewer job opportunities at the ports in Los Angeles and throughout the manufacturing supply chain of imports and exports are reduced once Trump's tariffs take effect.

"There will be fewer employment opportunities at the ports and throughout the supply chain that goes from the ports well into the Inland Empire, where huge numbers of containers are processed each day," he said.

Last year, California exported nearly $160 billion in manufactured goods, led by $47.9 billion in computer and electronic products, according to the Office of the United States Trade Representative. Other major exports included $18.4 billion in machinery and $16.2 billion in chemicals—all potentially at risk of retaliatory tariffs from trading partners in response to Trump's trade policies.

What People Are Saying

University of Southern California professor Jonathan Aronson told Newsweek: "Everybody loses in a trade war. How much they lose depends on how long the trade war lasts."

Daniel Sumner, an agricultural and resource economics professor at UC Davis, told Newsweek: "The new round of tariffs will clearly raise consumer food prices, perhaps especially fruit and vegetable prices, including those grown in California."

Gene Seroka, executive director of the Port of Los Angeles, told the Los Angeles Times that tariffs could lead to a 10 percent drop in cargo volume. "This is the widest sweeping tariff regime we've witnessed. Fewer containers coming to the Port of Los Angeles means fewer jobs."

What Happens Next

In response to the latest tariffs, world leaders have pledged to enact their own retaliatory measures on U.S. imports. The tariffs are set to go into effect between April 5 and 9.

The administration expects the new rates to remain in place until the U.S. narrows a $1.2 trillion trade imbalance recorded last year.