SACRAMENTO — Gov. Gavin Newsom’s Office said Tuesday that President Trump’s tariff policies will reduce revenue in California by $16 billion through next year.
Despite personal income tax and corporate tax receipts in the state coming in $6.8 billion above projections through April, the Newsom administration is predicting that overall revenue will be lower than it could have been from January 2025 through June 2026 because of the economic impact of Trump’s tariffs.
The governor released the new information, which his team dubbed the “Trump Slump,” on the eve of the presentation of his revised 2025-26 state budget plan, seeking to blame the president for California’s expected revenue shortfall. His office has not released any additional figures about the state budget.
Newsom is expected Wednesday to project a deficit for California in the year ahead with Medi-Cal costs exceeding expectations, including his signature policy to provide free healthcare coverage to low-income undocumented immigrants. The new shortfall comes in addition to $27.3 billion in financial remedies, including $16.1 billion in cuts and a $7.1-billion withdrawal from the state’s rainy day fund, that lawmakers and the governor already agreed to make in 2025-26.
The deficit marks the third year in a row that Newsom and lawmakers have been forced to reduce spending after dedicating more money to programs than the state has available to spend. Poor projections, the ballooning cost of Democratic policy promises and a reluctance to make long-term sweeping cuts have added to the deficit at a time when the governor regularly touts California’s place as the fourth-largest economy in the world.
Trump implemented a series of tariffs on all imported goods, higher taxes on items from Mexico, Canada and China, and specific levies on products and materials such as autos and aluminum, in April. The president has backed down from some of his tariffs, but Newsom alleges that the policies and economic uncertainty will lead to higher unemployment, inflation, lower GDP projections and less capital gains revenue for California.
California filed a lawsuit last month contending that Trump lacks the authority to impose tariffs on his own. On Tuesday, the state said it will seek a preliminary injunction to freeze the tariffs in federal court.
