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SAN FRANCISCO — California’s budget experts are expressing growing concern following a sharp decline in tech stocks this week, a trend attributed to President Donald Trump’s newly imposed tariffs. The implications for the state’s financial health could be significant, especially as the technology sector has been a crucial contributor to California’s budgetary balance.
Last year, a robust performance from tech companies helped strengthen the state’s coffers and even generated a modest surplus. In a notable nod to the industry, Governor Gavin Newsom praised chipmaker Nvidia in his State of the State address for its contribution to California’s thriving startup ecosystem. However, the latest turbulence in tech stocks has raised alarms among Democratic lawmakers, who worry about the risks posed to California’s fiscal stability.
State Senate Budget Chair Scott Wiener remarked, “Yes, it could absolutely harm California’s budget. Trump and [Elon] Musk are basically trying to collapse the economy,” signaling bipartisan concern regarding the economic fallout of the tariffs.
Jesse Gabriel, chair of the Assembly Budget Committee, characterized the decline in tech stocks as further evidence that President Trump’s tariffs are “ultimately self-defeating.” He emphasized that both parties should be wary of the detrimental effects on California’s economy, state budget, and its residents.
Since Trump assumed office, tech stocks have experienced a downturn, losing more than 7 percent of their value. The latest tariffs on Mexico and Canada triggered a sharp drop, which included a 9 percent decline in Nvidia shares on Monday.
While economists indicate that the immediate impact on major tech companies may be minimal due to their substantial profits, they warn that even slight reductions in cash flow can create anxiety among budget analysts. Christopher Thornberg, an economist with Beacon Economics, explained that tariffs on Chinese goods will complicate the production processes for California firms, potentially leading to increased costs and higher consumer prices long-term.
State Finance Department spokesperson H. D. Palmer highlighted that markets react poorly to uncertainty, a sentiment echoed in the current climate. Furthermore, with the Trump administration recently announcing a delay on a portion of the tariffs at the request of automakers, the full extent of the financial ramifications remains unpredictable.
John Villasenor, a professor at the UCLA Institute for Technology, Law and Policy, stated, “I don’t have a straight line ability to predict what it’s going to do to the California budget,” noting that the impact largely depends on the duration of the tariffs.
As California’s budget is heavily reliant on revenues from profitable tech enterprises, the potential consequences of tariffs are being closely monitored. A report from the Legislative Analyst’s Office indicated that the budget was expected to be “roughly balanced” for the 2025-2026 fiscal year, largely thanks to previous gains in the stock market.
California’s Department of Finance had previously cautioned that the state’s finances were particularly vulnerable to the repercussions of high tariffs. The upcoming comprehensive budget report in May is expected to shed additional light on the situation.
In the interim, Palmer humorously suggested a piece of wisdom from his recent fortune cookie: “Don’t worry about the stock market. Invest in family.” As the state reflects on its economic future, this lighthearted advice may serve as a momentary respite amidst the uncertainty.
