The MV Hyundai Hope is brought into the Port of Wilmington Wednesday May 20, 2020 along the Cape Fear River. The container ship is the largest in NC Ports history at 157 feet wide and nearly 1,200 feet long. It can carry almost 14,000 20-foot containers.
Sacramento, California – California’s budget could face serious challenges in the months ahead as President Donald Trump’s tariffs raise new economic uncertainties, state officials said this week.
With a state budget heavily reliant on income taxes from capital gains — particularly from high-earning residents profiting off the stock market — Governor Gavin Newsom’s administration has been anticipating potential trouble for some time. In fact, the governor had already flagged tariffs as a major economic threat back in his January budget proposal, according to H.D. Palmer, spokesperson for the California Department of Finance.
“Now that they’re in place, we’ll incorporate what we believe to be their effect,” Palmer said, noting that the department is working with outside experts, including the UCLA Anderson Forecast, to assess the situation. However, the full impact remains uncertain as the Trump administration’s trade policy continues to evolve and global responses take shape.
The recent plunge in stock market values, particularly among California’s tech giants, is already raising red flags for budget officials. A significant portion of California’s income tax revenue comes from the capital gains of the state’s wealthiest residents. With stock prices falling, that revenue stream may soon shrink — posing a potential blow to the state’s fiscal health.
Beyond Wall Street, California’s broader economy is also at risk. The state’s largest trading partner is China, and the newly imposed tariffs could hit California’s manufacturing and agriculture industries especially hard. Tourism and international trade, particularly through major ports in Los Angeles, Long Beach, and Oakland, could also suffer as the global economy adjusts.
Palmer said the Department of Finance will finalize its economic forecast by the end of April as part of Governor Newsom’s May revision of the state budget. Multiple economic models are being prepared, including some that factor in the need for spending cuts — though Palmer declined to specify which programs might face reductions.
“I don’t want to get into that game,” Palmer said. “That can just kind of inflame concerns that at the end of the day might not be warranted.”
As the state awaits more clarity on federal trade policy and global economic responses, the administration is preparing for a potentially volatile fiscal year ahead.
