California buckles up for the tariff-ying roller coaster

Politico

29-05-2025

TARIFFS TOSSED — BUT WAIT: A pair of federal court rulings blocking Donald Trump's tariffs have dealt a major blow to the president's economic agenda — though a subsequent appellate court stay is giving California leaders whiplash.
Here's what we know. Last night, a federal trade court struck down the president's emergency duties on imports, saying they exceeded his legal authority. Today, a judge issued a second ruling against the tariffs.
Hours later, an appeals court issued a temporary stay on the trade court's decision, reinstating (for now) tariffs Trump had imposed on more than 60 trading partners until it decides whether to grant a longer-term pause sought by the administration.
Democratic governors and attorneys general seized on the pair of lower-court rulings as an affirmation of their warnings about the economic toll of the contentious trade policy, our Dustin Gardiner and Alex Nieves report.
'It's raining tacos today,' Gov. Gavin Newsom said on the MeidasTouch Podcast, an apparent reference to the TACO acronym that Wall Street investors have used to refer to Trump's see-sawing import taxes.
Newsom and legislative leaders would love for the president's tariffs to go away. They blame a big chunk of California's $12 billion budget gap on the so-called 'Trump slump' — a projected downturn caused by the tariffs and other economic policies.
What does this all mean for California's budget? Budget leaders in the statehouse this morning stressed it was too soon to know. Their wariness was prescient, given the appeals court stay that followed.
'I need to understand more about what the next pass may be procedurally, in terms of them appealing this,' said Assembly Budget Chair Jesse Gabriel. 'In terms of them creating further uncertainty, in terms of doing additional tariffs with a different justification.'
'Sometimes they get tackled at the line of scrimmage on procedural stuff,' he added, 'and then they go back and they try to do the same thing.'
Short-term bump? Senate Budget Chair Scott Wiener said a stock market rally prompted by a tariff policy change could help the state, given California's heavy reliance on capital gains taxes.
'But in the short run, it doesn't change the problem,' Wiener said. 'We also know that Congress and Trump may make things worse if they pass this horrific budget bill that the House just passed.'
Assemblymember Patrick Ahrens, a Bay Area Democrat and co-chair of the California Legislative Technology and Innovation Caucus, said it's hard to predict whether Trump will back down from the tariff fight, given how his administration has challenged past court orders.
'This administration has criticized the courts probably more than anyone has,' he said.
Not jumping the gun: Business leaders from the Los Angeles ports to Silicon Valley had a somewhat muted response to the news as they wait for what comes next.
Port of Long Beach CEO Mario Cordero said shipping companies have told him they need time to assess the potential impacts of the court ruling before deciding whether to bring in more imports.
'We expect the canceled sailings at the Port of Long Beach in June to remain canceled until there is additional clarity about collection of tariffs,' Cordero said in a statement.
Trump's next play: Trump administration figures indicated they're not giving up on the tariffs yet, blaming 'activist judges' for last night's ruling and brushing off the argument that the president can't use the International Emergency Economic Powers Act of 1977 to justify the policy. The three U.S. Court of International Trade judges that delivered the ruling were appointed by Trump, Ronald Reagan and Barack Obama.
'The idea that the fentanyl crisis in America is not an emergency is so appalling to me that I'm sure that when we appeal, that this decision will be overturned,' said Kevin Hassett, the head of Trump's National Economic Council.
What about California's lawsuit? California in April was the first state to challenge the 'Liberation Day' tariffs — but it was still awaiting a ruling at the time of publication. A federal judge in San Francisco signaled on Tuesday that California's case might instead belong in the U.S. Court of International Trade, as the Trump administration asserted — the same panel that last night blocked the tariffs in a lawsuit filed by a dozen other Democratic states' attorneys general.
But today, a D.C. district court judge weighing a similar case ruled that it did have jurisdiction before granting the second injunction.
A spokesperson for California Attorney General Rob Bonta said the state is committed to moving forward with its separate lawsuit as it 'celebrates our sister states' win.'
Former AG weighs in: 'It wasn't just significant. It was consequential,' said Xavier Becerra, a Democratic candidate for governor who served as both California attorney general and a member of the House Committee on Ways and Means, which deals extensively with tariffs, in an interview before the appeals court stay.
'This decision, especially because it was unanimous — and especially because it included two judges appointed by Republicans — I think this crystallized what many of us have said, 'the president has a lot of authority, but it's not omnipotent, and he has to respect laws.'
— with help from Nicole Norman, Christopher Cadelago, Christine Mui and Tyler Katzenberger
IT'S THURSDAY AFTERNOON. This is California Playbook PM, a POLITICO newsletter that serves as an afternoon temperature check on California politics and a look at what our policy reporters are watching. Got tips or suggestions? Shoot an email to [e-mail].
WHAT YOU NEED TO KNOW TODAY
INTERNATIONAL STUDENT CRACKDOWN: Trump's recent moves on international students — including Secretary of State Marco Rubio's announcement last night that he'd revoke visas for Chinese students – threaten to blow up the budgets of institutions like the prestigious University of California that rely on foreign students who pay full tuition to keep in-state fees down. UC Berkeley alone drew $576 million from foreign-born students in the 2023-24 school year, our Rebecca Carballo reports.
'International students do pay significantly more tuition than in-state students,' said state Sen. Sasha Renée Pérez, a Los Angeles-Area Democrat who leads the education committee, 'so ultimately we are going to see an impact on budgets if we do continue to see that fear turn to a decline in student enrollment.'
The UC system's outgoing president, Michael Drake, who was being honored in the Capitol today, declined to comment on the visa announcement, telling our Tyler Katzenberger he hadn't had a chance to read up on it.
Ahrens, a former community college district board member, warned of the downstream effects of such policies, saying revoking Chinese student visas risks starving Silicon Valley of the 'best and brightest' international tech talent.
'We are the innovation capital of the world,' he said. 'The federal government revoking these visas, you know, it's destabilizing.'
Meanwhile, a federal judge today extended her block on the Trump administration's bid to stop international students from enrolling at Harvard, even after the White House said it had given the university a 30-day reprieve. The hearing, in a Boston courtroom, coincided with Harvard's commencement ceremonies a few miles away.
IN OTHER NEWS
SWEET TEA: A group of trade associations, local grocers, and convenience store owners are suing the seaside city of Santa Cruz over a soda tax passed by voters last November, arguing the measure was 'fatally flawed' and violates state law.
The lawsuit, although slightly delayed, was widely expected. After a series of Bay Area cities passed their own soda taxes between 2014 and 2016, beverage industry lobbyists successfully convinced the California legislature to pass a 'Keep Groceries Affordable Act' in 2018, which banned new soda taxes until 2031 and established a penalty for municipalities that did not comply.
Measure Z, which added a 2 cents per fluid ounce tax on the distribution of sugary drinks within Santa Cruz city limits, was drafted in part to initiate a legal challenge that would strike down the ban. But as the weeks ticked by after the tax took effect, even Santa Cruz's city attorney began to speculate that the beverage industry was afraid of losing the lawsuit, and may not sue at all.
That turned out to be wishful thinking.
'Santa Cruz leaders sold their constituents a fatally flawed tax scheme in Measure Z, one that is not only illegal but also regressive in that it will impact working class families the hardest while increasing the cost of living for all Santa Cruz residents and jeopardizing the well-being of local businesses,' said Jennifer Barrera, the president and CEO of CalChamber, in a press release announcing the lawsuit. — Will McCarthy
CRYPTO COMPATRIOTS: A nonprofit with ties to Trump is sponsoring California legislation from a Democrat on an issue the president has embraced in his Oval Office comeback: cryptocurrency, our Tyler Katzenberger reports.
The group, co-founded by Mandy Gunasekara, former chief of staff at the Environmental Protection Agency during Trump's first term, is backing a bill from Democratic California Assemblymember Avelino Valencia that could make it easier to pay with cryptocurrency in the Golden State.
Valencia's bill presents a crucial test for the nonprofit Satoshi Action Fund's state-first strategy, given it deviates from the wider industry's Washington-focused approach.
'The industry was playing a lot of defense,' Satoshi CEO Dennis Porter, a crypto advocate and former podcaster who hosted his own show about Bitcoin, told POLITICO's California Decoded newsletter. '[If] you're on defense 100 percent of the time, you'll never win a single match.'
IN THE GAME: Rep. Robert Garcia is officially making a bid to become the top Democrat on the House Oversight and Government Reform Committee, our Hailey Fuchs and Nicholas Wu report.
Garcia, a 47-year-old in his second House term, emphasized in a letter to colleagues his experience as the former mayor of Long Beach. He suggested his caucus needed to value both the experiences of 'seasoned legislators with the fresh energy and bold ideas of our newer Members.'
Garcia is the first lawmaker to formally announce his candidacy in a race that will likely test generational tensions in the party. POLITICO reported earlier in the month that he was making quiet moves to pursue the Oversight position after Virginia Rep. Gerry Connolly announced he would step down from the role. Connolly died last week after fighting esophageal cancer.
New York Rep. Alexandria Ocasio-Cortez's decision to forgo the role prompted Garcia and other young Democrats to begin considering it.
WHAT WE'RE READING TODAY
— Tesla and Elon Musk are criticizing the Republican megabill for 'abruptly ending the energy tax credits.' (POLITICO)
— City officials are stepping in to resolve a conflict between Santa Monica residents and Waymo cars. (Los Angeles Times)
— Newsom will not be at the California Democratic Party's state convention. (Sacramento Bee)
AROUND THE STATE
— A recall election against San Francisco Supervisor Joel Engardio, fueled by anger over a ballot measure he backed to close a stretch of the Great Highway to traffic, has qualified. A special election will be held on Sept. 16. (San Francisco Chronicle)
— Some San Jose City councilmembers want to put a temporary ban on new smoke shops so they can create new licensing requirements. (San Jose Mercury News)
— San Luis Obispo County Supervisor Bruce Gibson will not run for reelection, ending a two-decade tenure on the board. (San Luis Obispo Tribune)
— compiled by Nicole Norman