Latest news with #UCLAAndersonForecast
Yahoo
14-04-2025
- Business
- Yahoo
Trump's volatile trade policy creates new problems for California state budget
As the stock market plummeted last week, California Assembly Speaker Robert Rivas sat at his desk in the state Capitol and predicted that President Trump's tariffs would 'squeeze our economy at every level.' 'This is certainly going to be the most challenging of years when it comes to our budget that I've had in my time in the Legislature. There will be some tough choices ahead,' the Democrat from Hollister forewarned. 'But again, it's so difficult to navigate this issue at the moment because of so much uncertainty. Every day is different.' Less than 48 hours later, Trump paused most of the tariffs he imposed on imported goods. The financial markets that California's progressive tax structure is dependent on shot up in response before bouncing up and down the rest of the week. The whiplash underscores the challenge before lawmakers and Gov. Gavin Newsom this spring as they attempt to develop a state budget plan for the year ahead that funds schools, healthcare, roadways and other essential services. Every state budget is built on forecasts of state and federal economic conditions that will affect tax revenues over the next 12 months. California's oversized reliance on income tax from the top 1% of its earners, whose fortunes are often tied to the rewards they reap from the stock market, leaves the state particularly vulnerable to the booms and busts of Wall Street. Trump's erratic trade policies and threats to withhold federal funds from California, from public health funding to support for schools, have made predicting revenues even more precarious than usual. The tariffs and in-kind retaliation from other countries would undoubtedly hurt California, from new surcharges on almond exports to deflating Silicon Valley tech stocks. Predicting if, or when, the additional tariffs could take effect and the potential fallout relies less on an understanding of U.S. economic policy and more on the psyche of the president. Read more: China to reduce the number of Hollywood films allowed amid trade war That poses a challenge for the Newsom administration, which is currently trying to develop economic forecasts for the budget year that begins in July. The estimates will serve as the bedrock of a revised state budget plan the governor presents to the Democratic-led legislature next month. Before negotiations over the final spending plan even begin, Rivas is already cautioning the budget passed before the June deadline may need to be altered significantly before the Legislature adjourns in the late summer, or sometime in the fall. 'We have not seen the kind of changes in economic policy in Washington, either in intensity or rapidity, before,' said Jerry Nickelsburg, a senior economist for the UCLA Anderson Forecast. 'It is difficult to predict, but predict the executive and the legislative branch must do, and so the appropriate way to approach this is to be more conservative than the objective data would tell you.' Trump imposed 10% worldwide tariffs and 25% tariffs on autos and auto parts. Locked in a trade war with China, he increased the tax rate on Chinese imports to 145%, while China raised tariffs on U.S. goods to 84%. Trump paused additional tariffs on goods imported from other nations for 90 days, citing his desire to negotiate. H.D. Palmer, a spokesperson for the California Department of Finance, said the effects of tariffs that remain in place for international countries and China, a large trading partner for California, will be considered in the state's updated economic forecast for 2025-26, at least as of today. But it's harder to build revenue projections around tariffs that may or may not be negotiated away. 'We're trying to wait as long as we can because things change every day,' said Somjita Mitra, chief economist for the Department of Finance. 'So we're trying, you know, to see as much information as possible.' In Newsom's initial budget proposal announced in January, the governor flagged "uncertainty about federal policy" as the "most immediate risk to the forecast." The state stands to lose revenue from sales and use taxes, personal income taxes and corporate taxes. The budget said Trump's tariffs proposal increases prices for consumers and businesses for everyday and essential goods, which could potentially lead to higher inflation, less spending and reduced sales tax revenue for California. Read more: Another victim of Trump's tariffs: California's electric vehicle ambitions Palmer noted that the state also is particularly vulnerable to stock market declines because the top 1% of income tax filers typically generated around 40% of all personal income tax paid in California. Their income is largely derived from capital gains and stock market options, or bonuses paid out based on stock performance. "When the markets are doing well, they're doing well, and as a result, our revenue picture is doing well," Palmer said. "Conversely, when the markets tank and they're not doing so well, we don't do so well." The "Magnificent Seven" tech stocks in the U.S. belong to companies largely based in California, such as Apple and Nvidia. The role those companies play in California's revenues from capital gains is greater than in other parts of the country, which leaves the state more susceptible to stock market declines. Mitra noted that California's agricultural industry, particularly almond and pistachio producers that supply a large percent of the world market, could be hurt if other countries raise taxes on goods exported from the U.S. in response to Trump's tariffs. Ports in Los Angeles, Long Beach and Oakland stand to lose logistical jobs if global trade declines. Tensions with other countries could also reduce travel and tourism to California, affecting hotels, theme parks and restaurants, Palmer said. China's decision this week to reduce the number of U.S. films released in the country will hurt major Hollywood studios. Even before sweeping tariffs are imposed, Nickelsburg said the uncertainty from Washington will already affect California revenues. Stock market volatility tends to depress initial public offerings and exercises of stock options, which are two important sources of capital gains that boost state revenues. The housing market, another origin of capital gains, is also likely to take a hit because people will be hesitant to buy homes if they don't feel confident in the economy, he said. The effects of tariffs are only one source of potential financial problems for California from the Trump administration. Since Trump took office his administration has made threats to cut billions in federal funding from California, punishing the state for its policies on parental notification of student gender changes and for offering diversity, equity and inclusion programs in schools. Many of the attempts to slash funding, such as the administration's effort to rescind $200 million in federal funds for academic recovery after the pandemic, continue to be litigated in court. That leaves California with another big budget uncertainty. Read more: California, other states sue Trump administration over clawback of COVID school funds "California has had to step up because the federal government has pulled the rug out from all of our programs, all of our social safety nets," said Assemblymember Isaac Bryan (D-Los Angeles) during a floor debate this week. Republicans at the state Capitol were quick to remind Democrats that not all fiscal challenges in California are Trump made. The Legislature passed a bill Thursday to appropriate an extra $11.1 billion in state and federal funding to cover cost overruns for Medi-Cal, the healthcare program for low-income Californians, through the end of the current fiscal year. A large share of the unexpected costs are from the state's expansion of healthcare coverage to all immigrants, regardless of legal residency status. While Newsom has committed to maintaining the program this year, cuts could be on the table in negotiations over next year's budget. Before the effects of the cuts and tariffs were taken into account, the governor's January budget proposal had already relied on taking $7.1 billion from the rainy day fund to pay for state programs. "Only in politics do you do a poor job and then try to blame someone else," said state Sen. Tony Strickland (R-Huntington Beach). As the threat of tariffs hangs over California's budget and economy, the state should consider adopting policies to increase manufacturing and production to be less reliant on foreign suppliers, Strickland said. He called out the state's reliance on timber from Canada and oil and gas from overseas. Sign up for Essential California for news, features and recommendations from the L.A. Times and beyond in your inbox six days a week. This story originally appeared in Los Angeles Times.
Los Angeles Times
14-04-2025
- Business
- Los Angeles Times
Trump's volatile trade policy creates new problems for California state budget
SACRAMENTO — As the stock market plummeted last week, California Assembly Speaker Robert Rivas sat at his desk in the state Capitol and predicted that President Trump's tariffs would 'squeeze our economy at every level.' 'This is certainly going to be the most challenging of years when it comes to our budget that I've had in my time in the Legislature. There will be some tough choices ahead,' the Democrat from Hollister forewarned. 'But again, it's so difficult to navigate this issue at the moment because of so much uncertainty. Every day is different.' Less than 48 hours later, Trump paused most of the tariffs he imposed on imported goods. The financial markets that California's progressive tax structure is dependent on shot up in response before bouncing up and down the rest of the week. The whiplash underscores the challenge before lawmakers and Gov. Gavin Newsom this spring as they attempt to develop a state budget plan for the year ahead that funds schools, healthcare, roadways and other essential services. Every state budget is built on forecasts of state and federal economic conditions that will affect tax revenues over the next 12 months. California's oversized reliance on income tax from the top 1% of its earners, whose fortunes are often tied to the rewards they reap from the stock market, leaves the state particularly vulnerable to the booms and busts of Wall Street. Trump's erratic trade policies and threats to withhold federal funds from California, from public health funding to support for schools, have made predicting revenues even more precarious than usual. The tariffs and in-kind retaliation from other countries would undoubtedly hurt California, from new surcharges on almond exports to deflating Silicon Valley tech stocks. Predicting if, or when, the additional tariffs could take effect and the potential fallout relies less on an understanding of U.S. economic policy and more on the psyche of the president. That poses a challenge for the Newsom administration, which is currently trying to develop economic forecasts for the budget year that begins in July. The estimates will serve as the bedrock of a revised state budget plan the governor presents to the Democratic-led legislature next month. Before negotiations over the final spending plan even begin, Rivas is already cautioning the budget passed before the June deadline may need to be altered significantly before the Legislature adjourns in the late summer, or sometime in the fall. 'We have not seen the kind of changes in economic policy in Washington, either in intensity or rapidity, before,' said Jerry Nickelsburg, a senior economist for the UCLA Anderson Forecast. 'It is difficult to predict, but predict the executive and the legislative branch must do, and so the appropriate way to approach this is to be more conservative than the objective data would tell you.' Trump imposed 10% worldwide tariffs and 25% tariffs on autos and auto parts. Locked in a trade war with China, he increased the tax rate on Chinese imports to 145%, while China raised tariffs on U.S. goods to 84%. Trump paused additional tariffs on goods imported from other nations for 90 days, citing his desire to negotiate. H.D. Palmer, a spokesperson for the California Department of Finance, said the effects of tariffs that remain in place for international countries and China, a large trading partner for California, will be considered in the state's updated economic forecast for 2025-26, at least as of today. But it's harder to build revenue projections around tariffs that may or may not be negotiated away. 'We're trying to wait as long as we can because things change every day,' said Somjita Mitra, chief economist for the Department of Finance. 'So we're trying, you know, to see as much information as possible.' In Newsom's initial budget proposal announced in January, the governor flagged 'uncertainty about federal policy' as the 'most immediate risk to the forecast.' The state stands to lose revenue from sales and use taxes, personal income taxes and corporate taxes. The budget said Trump's tariffs proposal increases prices for consumers and businesses for everyday and essential goods, which could potentially lead to higher inflation, less spending and reduced sales tax revenue for California. Palmer noted that the state also is particularly vulnerable to stock market declines because the top 1% of income tax filers typically generated around 40% of all personal income tax paid in California. Their income is largely derived from capital gains and stock market options, or bonuses paid out based on stock performance. 'When the markets are doing well, they're doing well, and as a result, our revenue picture is doing well,' Palmer said. 'Conversely, when the markets tank and they're not doing so well, we don't do so well.' The 'Magnificent Seven' tech stocks in the U.S. belong to companies largely based in California, such as Apple and Nvidia. The role those companies play in California's revenues from capital gains is greater than in other parts of the country, which leaves the state more susceptible to stock market declines. Mitra noted that California's agricultural industry, particularly almond and pistachio producers that supply a large percent of the world market, could be hurt if other countries raise taxes on goods exported from the U.S. in response to Trump's tariffs. Ports in Los Angeles, Long Beach and Oakland stand to lose logistical jobs if global trade declines. Tensions with other countries could also reduce travel and tourism to California, affecting hotels, theme parks and restaurants, Palmer said. China's decision this week to reduce the number of U.S. films released in the country will hurt major Hollywood studios. Even before sweeping tariffs are imposed, Nickelsburg said the uncertainty from Washington will already affect California revenues. Stock market volatility tends to depress initial public offerings and exercises of stock options, which are two important sources of capital gains that boost state revenues. The housing market, another origin of capital gains, is also likely to take a hit because people will be hesitant to buy homes if they don't feel confident in the economy, he said. The effects of tariffs are only one source of potential financial problems for California from the Trump administration. Since Trump took office his administration has made threats to cut billions in federal funding from California, punishing the state for its policies on parental notification of student gender changes and for offering diversity, equity and inclusion programs in schools. Many of the attempts to slash funding, such as the administration's effort to rescind $200 million in federal funds for academic recovery after the pandemic, continue to be litigated in court. That leaves California with another big budget uncertainty. 'California has had to step up because the federal government has pulled the rug out from all of our programs, all of our social safety nets,' said Assemblymember Isaac Bryan (D-Los Angeles) during a floor debate this week. Republicans at the state Capitol were quick to remind Democrats that not all fiscal challenges in California are Trump made. The Legislature passed a bill Thursday to appropriate an extra $11.1 billion in state and federal funding to cover cost overruns for Medi-Cal, the healthcare program for low-income Californians, through the end of the current fiscal year. A large share of the unexpected costs are from the state's expansion of healthcare coverage to all immigrants, regardless of legal residency status. While Newsom has committed to maintaining the program this year, cuts could be on the table in negotiations over next year's budget. Before the effects of the cuts and tariffs were taken into account, the governor's January budget proposal had already relied on taking $7.1 billion from the rainy day fund to pay for state programs. 'Only in politics do you do a poor job and then try to blame someone else,' said state Sen. Tony Strickland (R-Huntington Beach). As the threat of tariffs hangs over California's budget and economy, the state should consider adopting policies to increase manufacturing and production to be less reliant on foreign suppliers, Strickland said. He called out the state's reliance on timber from Canada and oil and gas from overseas.
Yahoo
21-03-2025
- Business
- Yahoo
Trump tries to save Tesla, recession fears, and dismantling the DOE: Politics news roundup
President Donald Trump's burgeoning clashes with some of the U.S.' top trade partners aren't just trade disputes — they could be part of an economic war, according to one expert. Tariffs — which are set to slam most U.S. industries, including tech and media companies — are just part of that. Those duties on imports from foreign countries are also expected to hinder economic growth and potentially lead to a recession, which the president has yet to rule out as a possibility. The Federal Reserve has also raised its forecast for inflation and unemployment, even as uncertainty clouds its economic projections. Catch up on all that and more — including how the White House is trying to give Elon Musk's Tesla a helping hand and what Trump's push to weaken the Education Department could mean for millions of Americans — in this week's politics roundup. As protests — peaceful and violent — against Tesla (TSLA) and its CEO Elon Musk show no signs of slowing down, the White House is stepping in. Read More In the first few weeks of his second administration, President Donald Trump has followed through — then pulled back — on tariff threats, sending stocks tumbling into correction territory. — Britney Nguyen Read More With the U.S. Department of Education on the chopping block, the agency is getting more scrutiny than usual. But what does the Department of Education do? Experts lament the impact the Department's demise will have on some of its lesser-known roles. — Kevin Williams Read More President Donald Trump's ever-shifting trade war could cost the U.S. technology, media, and telecommunications (TMT) industry billions of dollars annually, according to a new PwC report analyzing the impact of ongoing tariffs. With heightened duties — particularly on imports from China — companies are scrambling to assess financial risks and rethink supply chains. — Bruce Gil Read More Commerce Secretary Howard Luntick made a direct public recommendation on Wednesday that Americans should buy shares of Tesla (TSLA), the company run by Elon Musk. Read More President Donald Trump's policies on trade, government employment, and immigration will cause an unnecessary economic recession if they're fully or almost fully enacted, while also boosting inflation, according to the UCLA Anderson Forecast. — Josh Fellman Read More As Wall Street grapples with the increasing likelihood of a U.S. recession, the Trump administration has gone to bat defending President Donald Trump's stock market-slamming trade policies. Read More The Federal Reserve kept interest rates on hold on Wednesday as expected, but it raised its inflation and unemployment forecasts, trimmed its GDP projection, and slowed the pace of the sale of some assets from its balance sheet. The CPI outlooks for this year and next are now 2.7% and 2.2%, respectively. — Josh Fellman Read More For the latest news, Facebook, Twitter and Instagram.
Yahoo
19-03-2025
- Business
- Yahoo
Trump policies 'promise' an economic downturn: Prominent forecaster
Wall Street is reacting to the Federal Reserve's decision leave interest rates unchanged. Meanwhile, the UCLA Anderson Forecast warns that President Trump's policies, if fully enacted, will lead to a recession. NBC News senior business correspondent Christine Romans, Washington Post opinion columnist and MSNBC host Catherine Rampell and Brendan Buck, former Press Secretary to House Speakers Paul Ryan and John Boehner, join Chris Jansing to discuss.
Yahoo
19-03-2025
- Business
- Yahoo
Trump's policies might cause a deep recession and stagflation, study says
President Donald Trump's policies on trade, government employment and immigration will cause an unnecessary economic recession if they're fully or almost fully enacted, while also boosting inflation, according to the UCLA Anderson Forecast. While there is no immediate sign of one, the Trump administration should be warned that 'if all your wishes come true, you could very well be the author of a deep recession,' Clement Bohr, an economist for the organization, wrote on its website. 'And it may not simply be a standard recession that is being chaperoned into existence, but a stagflation.' Recent economic indicators have been choppy, with consumption and the labor market holding up, but with indicators of sentiment cratering as increased uncertainty may prompt companies to hold off on fresh investments. Much-higher tariffs will make it much more costly for American manufacturers to produce because of highly integrated cross-border supply chains, Bohr said. This will make some operations uneconomical. Retail and agriculture will also likely contract. The construction sector is particularly vulnerable to the Trump administration's mass deportations because it relies heavily on immigrant labor, the forecast says. Historical data shows that past waves of deportations going back to the 19th century have led to reduced employment for the rest of the population. The changes will boost both costs and prices, adding to inflation even as economic growth slows. And if the Trump administration succeeds in influencing monetary policy decisions, the Federal Reserve may be left without tools to contain rising prices. And efforts by Elon Musk's Department of Government Efficiency to cut the federal workforce — including contractors and grant recipients — by 10% to 15% will lead to up to one million people losing their jobs, the largest single layoff event in U.S. history, Bohr wrote. The sector usually serves as a stabilizer for the labor market and broader economy. For the latest news, Facebook, Twitter and Instagram.
