Sacramento – Gov. Gavin Newsom's office said Tuesday that President Trump's tariff policy will reduce California's state revenue by $16 billion next year.
Although the state's personal income tax and corporate tax revenues were $6.8 billion higher than forecasts before April, the News Magazine Administration predicted that overall revenue will be lower than from January 2025 to June 2026 due to the economic impact of Trump's tariffs.
The governor released new information, which his team calls “Trump down,” on the eve of his revised 2025-26 national budget plan, attempting to blame the president for the inadequate revenue expected by California. His office has not released any other data on the state budget.
Newsom is expected to project California’s deficit in the coming year on Wednesday, while MEDI-CAL costs exceed expectations, including his signature policy, providing free medical insurance to low-income undocumented immigrants. The new shortage, in addition to $27.3 billion in financial remedies, includes $16.1 billion cuts and $7.1 billion withdrawn from the state's rainy day fund, which the lawmaker and the governor have agreed to obtain in 2025-26.
The deficit marks the third year that Newsom and lawmakers are forced to reduce spending after they devote more money to the program. The deficit has been increased by the fact that the governor often views California as the world's fourth largest economy, poor projections, the intense costs of democratic policy commitments and the reluctance to make long-term large cuts.
Trump imposed higher taxes on all imported goods, products in Mexico, Canada and China, and imposed a series of tariffs on products and materials such as Autos and Aluminum in April. The president has backed down some tariffs, but Newsom claims policy and economic uncertainty will lead to higher unemployment, inflation, lower GDP forecasts and reduced capital income in California.
California filed a lawsuit last month that Trump lacked the power to impose tariffs himself. The state said Tuesday it would seek a preliminary injunction to freeze federal court tariffs.
