Trump’s Tariffs Slash $16B From California’s Coffers—Goldman Probably Saw It Coming

Trade wars aren’t just bad for business—they’re fiscal bloodletting. California’s tax revenue takes a $16 billion hit as Trump’s tariffs backfire spectacularly.

Who could’ve predicted protectionism would punish a trade-dependent economy? Oh right, everyone.

The Golden State’s budget now sports a tariff-shaped hole—just as Wall Street banks finish counting their record trading profits from the volatility.

Newsom calls the gap “Trump Slump”

Politico first reported on the memo, which lands one day before the governor is due to unveil his new budget proposal for the coming fiscal year. 

California’s budget is dependent on the richest households. The top 1% of earners pay nearly half of all personal‑income tax, and much of that money hinges on capital‑gains income that follows the stock market.

The new hit to the treasury comes on top of $27.3 billion in financial remedies. It includes $16.1 billion in cuts and a $7.1 billion removal from the state’s rainy‑day fund. California’s constitution requires a balanced budget each year, which means that any shortfall must be closed. Hence, this will be the third year in a row that Newsom and lawmakers trim spending after earlier budgets allocated more money than the state can spend on various programs.

Trump’s April tariff order placed duties on all imported goods, raised taxes on items from Mexico, Canada and China, and set extra levies on products such as cars and aluminum. While the president has since eased some of those tariffs, Newsom argues that the policy and the uncertainty around it will raise unemployment and inflation, lower gross domestic product and shrink capital‑gains revenue for California.

Last month California sued Trump, saying that he lacks the authority to impose tariffs all on his own.  On Tuesday, state attorneys said they will ask a federal judge for a preliminary injunction that WOULD freeze the tariffs while the case moves forward.

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