Gavin Newsom memo: Trump’s tariffs will cost California $16 billion
California is projecting a $16 billion loss in state revenue tied to President Donald Trump’s tariffs, according to a memo from Gov. Gavin Newsom’s office obtained ahead of his revised budget release Wednesday.
The governor will unveil his revised budget on Wednesday, and is expected to say that the president’s on-and-off tariffs have “slowed the economy and weakened state revenues” by 4% through the fiscal year that ends June 30, 2026.
The $16 billion hit to the state’s general fund is the difference between what California is projecting it would have recouped in the months since Newsom unveiled his $322 billion budget in January, versus what it has actually gained, according to a budget official who declined to be named because they were not authorized to speak.
That means there will be billions less to spend as California lawmakers go into final budget negotiations and face Medi-Cal shortfalls coupled with a delay in tax filings from Los Angeles-area wildfire victims. The $16 billion hole is comprised of a $10 billion shortfall in capital gains, $2 billion in personal income tax with holdings and lower wages, $2.5 billion in corporation taxes, and $1.5 billion in other personal income tax items, according to the memo.
Trump initially levied heavy taxes on imported goods from countries like China and Mexico, prompting Newsom to plead with those nations’ leaders to spare California. On Sunday, Treasury Secretary Scott Bessent said the two nations agreed to quell their trade war, with the U.S. lowering its 145% tariff on Chinese goods to 30%.
“Going into the May Revision, personal income tax and corporation tax receipts through April, which were primarily related to economic activity in 2024, were $6.8 billion above the governor’s budget forecast after adjusting for expected shifting related to the delayed tax deadline for taxpayers in Los Angeles county,” the two-page memo from Newsom’s office read.
“However, the Trump administration’s tariff policies weakened the U.S. and California’s economic outlook and led to a decrease in the stock market in April 2025. These factors had a direct negative impact on California tax revenues beginning in 2025 and reversed the positive cash trends seen to date.”
The governor has done interviews and run Fox News ads trying both to rehabilitate his party’s “toxic brand” and convince voters that Trump’s tariffs will cost them at the checkout line and destroy small businesses, to varying degrees of success.
Nationally, Democrats are beginning to coalesce around the tariffs’ harm to small businesses, but Newsom caught flak last month from some of his fellow party members for calling the media attention around a Maryland deportee a “distraction.”
The governor’s memo was first reported by Politico.
This story was originally published May 13, 2025 at 5:11 PM.
