Trump tariffs and immigration policy create uncertainty for California economy, study shows
The Trump administration’s tariff and immigration policies create uncertainty about California’s economy that’s “very much elevated,” a new UCLA Anderson forecast said Wednesday.
The forecast cited “unique challenges” because of a “disruption of the previous functioning of national government.“
It specifically mentioned the dramatic changes in tariff and immigration policy since President Donald Trump took office on Jan. 20.
Trump on Tuesday imposed 25% tariffs, or taxes, on goods imported from Canada and Mexico. Canadian energy was hit with a 10% tariff. The president also doubled last month’s tariffs on Chinese imports to 20%.
Canada and Mexico plan to retaliate. Prime Minister Justin Trudeau said his country would impose tariffs on billions of dollars of American items within the next few weeks. Mexico intends to announce its plans soon.
Trump has also ordered a crackdown on illegal border crossings and has vowed to deport undocumented aliens.
As a result of all these changes, said Jerry NIckelsburg, Anderson forecast director, “the uncertainty that is associated with any forecast is now very much elevated.”
Immigration
Immigration policy could have two big effects on California’s economy.
First, said Nickelsburg, could be the loss of undocumented workers from the labor force. Second could involve the impact on the technology industry.
The state’s unemployment rate has been the nation’s highest or close to it for some time. In December, the latest data available, the state jobless rate was 5.5%. Only Nevada, at 5.7%, was higher among the 50 states. The national rate was 4.1%.
Next year, the forecast saw the state rate averaging 5.2%, still higher than the nation’s 4.4%.
Big reasons for the gap between California and other states include sluggish hiring in the the state’s entertainment industry and cutbacks in big-technology and agricultural employment.
Job growth has centered recently in the health care and social services, leisure and hospitality, education, government, logistics and retail trade.
But, said Nickelsburg, who wrote the forecast, “Deportations and reductions in federal support for health care will disproportionately affect health care and social services, retail, and leisure and hospitality.” Construction and some manufacturing could also be impacted.
Agriculture could be hit particularly hard. “The rhetoric from the new administration does not include bringing back the undocumented agricultural workers,” the forecast predicted.
Temporary visas could help provide workers, but the forecast said those are probably going to seasonal and not permanent workers.
The impact of immigration on technology looms as different. Workers who qualify for more sophisticated jobs in the industry should not find much of a problem, the forecast suggested.
“The emphasis the new administration is expected to place on the growth of technology suggests that will benefit California’s tech industry,” it predicted.
Tariffs
“Tariffs will be the main cause of higher prices in 2025,” the forecast said.
It saw the cost of living going up at an annualized rate of 3.2% this spring in California, 3% this summer and 2.9% this fall, then going up to 3% again in the first half of 2026. While that is historically low, it’s a jump from 2.5% this winter and 1% last fall..
The national Consumer Price Index was up at an annualized rate of 3% in January.
The Anderson forecast also cited tariffs’ more indirect consequences. Aluminum and steel are important in manufacturing and construction,
Higher costs from tariffs “have shown to lead to highly persistent negative impacts on downstream industry exports, production, and employment,” the forecast said.
In California, which already faces limited housing supplies and struggles with affordability, “the source of building materials is international with key inputs such as lighting and electrical fixtures and appliances originating in China,” the forecast said.
Higher costs for these products “will increase the cost of construction and further limit the demand for newly built homes,” it said.
Wildfires
The forecast detailed the economic fallout from the devastating wildfires that burned through the Los Angeles area starting in early January. At least 29 people were killed in the blazes.
The forecast estimated that total property and other losses could range from $76 billion to $131 billion. Insured losses are estimated to be up to $45 billion.
Wage loss could total $297 million.
The forecast predicted that Los Angeles housing, notably rental properties, “will become increasingly unaffordable.”
The report estimated that the fires destroyed 16,251 homes, commercial properties and other structures.
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