How Trump's tariffs could affect California consumers and what could get more expensive

FILE ART- Port of Oakland.
OAKLAND, Calif. - California has the fifth-largest economy in the world, and in the U.S., the Golden State is number one in imports with the second-highest ranking when it comes to exports.
So how would Donald Trump’s tariff plans affect local businesses and ultimately hit consumers’ pocketbooks here in this state?
What we know:
The three countries targeted by Trump are not only the U.S.’s three largest trading partners, but they're at or near the top for California.
Figures from the International Trade Association show that in 2023, China was the state’s number one import partner with goods valued at $120.5 billion.
Mexico followed with $61.5 billion in imports. Canada was 7th with almost $15.7 billion.
The president's plan to impose a 10% tariff on all goods from China went into effect on Tuesday, with China promptly responding with its own set of retaliatory tariffs on select American imports.
He initially declared a 25% tax on goods from Canada and Mexico, but later agreed to a 30-day pause for time for negotiations.
The president said the tariffs would be imposed as a tool to "secure borders."
The other side:
Some researchers question tariffs' effectiveness and suggest they result in causing more harm domestically.
"The problem with these tariffs is that they impose immediate costs on U.S. consumers, workers, and businesses without a clear link between these tariffs and how they will reduce flows of immigrants or fentanyl," the Brookings Institute said.
Economists said tariffs would likely lead to job losses and pressure on unemployment.
"I don't think you'll find an economist that will tell you that tariffs are good," said Stephen Levy, director and senior economist with the Center for Continuing Study of the California Economy (CCSCE) in Palo Alto.
How consumers will be affected
Big picture view:
While consumers won’t be directly hit by the tariffs, economic experts said the public is expected to feel the trickle down.
"The tariffs are paid by the domestic purchasers-- the companies, and they will either pass along those prices to consumers or reduce supply, which will inadvertently increase prices to consumers, and then there's retaliation," said Levy.
SEE ALSO: Bay Area small businesses on edge as tariff uncertainty lingers
Researchers from Yale University’s "The Budget Lab" projected consumer prices will spike by 1.4% to 5.1%.
"This cost is the equivalent of $1,900 to $7,600 per household in 2023 dollars," researchers explained. "A consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country."
How will California be affected?
Levy said that it's unclear what specific industries would take a hit, but he noted there could be possible unintended consequences for the state's lucrative tourism sector.
"One of the things that can really happen is Mexican and Canadian and Chinese tourist can feel not welcome here," the economist said. "So an unintended consequence should be a hit to tourism-- hotels, airports, restaurants, if they begin to feel antagonistic towards the United States."
What we don't know:
It's unknown how widely implemented tariffs would be if they go through, so it's difficult to pinpoint how they would affect the price of imported goods.
Levy did note that California is the destination port for half of Chinese imports.
And he speculated the tariffs could affect automobile costs.
"If there are trade tariffs on Mexico and Canada, that's gonna disrupt the auto market and the railroads that carry those products around, and so it's just not a good situation," the economist said.
The top sectors that imported goods to California in 2023 were:
- Computer and electronic products
- Transportation equipment
- Electrical equipment, appliances and components
- Miscellaneous manufacturers
- Oil and gas
Dig deeper:
Some of the top imports from China include computer and communications equipment, apparel, plastic products, footwear, semiconductors/other electronic components, and auto/video equipment.
The International Trade Administration said that from Mexico, California gets top products including motor vehicles, audio/video equipment, fruits/tree nuts, computer equipment, and vegetables/melons.
And from Canada, the top imports include motor vehicles, grain/oil seed milling products, oil and gas, bakery/tortilla products, and plastic products.
Impact on exports
The tariffs would not only have an impact on imports, but exports would also largely be affected as goods sent out of the U.S. and California would likely decline.
The three countries targeted by Trump are California's top three export destinations.
In 2023, total exports to Mexico were valued at $33.3 billion.
That was followed by Canada at $19.4 billion.
Researchers from the Brookings Institute found a 25% tariff on Canada and Mexico would lead to a roughly 6% reduction in exports to those countries.
And in the event the countries retaliate, exports would decline by 9%, Brookings said.
In 2023, China received $16.9 billion in imported goods from California.
Back during Trump’s first term, he imposed a tariff on China that also led to retaliatory actions by Beijing.
The University of California Giannini Foundation of Agricultural Economics said China's import tariffs then target U.S. agriculture, hitting California's fruit, nuts and wine industry especially hard.
Figures from the foundation showed a drop in the state's exports of wine, oranges, table grapes and walnuts.
"There is no evidence that this blunt policy approach has had any success and instead it has only served to harm consumers in both countries and financially injured some U.S. farmers," researchers noted.
The foundation also pointed to potential problems even after tariffs are lifted.
"In addition, there could be long-lasting consequences for California associated with China looking elsewhere for export suppliers, and using this opportunity to diversify its supply chains," the agricultural economics group said.
Impact on jobs and inflation
Brookings researchers studied how the tariffs could lead to job losses.
"In the U.S., employment will decline by 0.11% from the 25% tariffs on imports and rise to a 0.25% loss of jobs with retaliation," the think tank said.
Researchers said that's equivalent to more than 177,000 job losses from the 25% tariff on Mexican and Canadian goods coming into the U.S.
A retaliatory tariff by those countries would spike the number of job losses to more than 400,000, Brookings predicted.
"If there's retaliation, we have job losses and some pressure on unemployment," Levy said.
Many economists said the public should be prepared to see tariffs lead to increased inflation.
"The inflation will hit consumers, and the higher interest rates will hit consumers," Levy said.
Economist Gregory Daco with the tax and consulting firm EY projected the U.S. economy, which grew 2.8% last year, would fall by 1.5% this year and 2.1% in 2026, the Associated Press reported.
The backstory:
On the campaign trail, Trump promised to bring down prices for consumers, saying he would act on "Day 1" to cut costs for Americans.
But he is now backing off those promises.
"Will there be some pain? Yes, maybe (and maybe not)," Trump wrote Sunday morning on social media, adding, "It will all be worth the price that must be paid."
What's next:
Leaders from the two countries acted to address the president's demands regarding border security and drug trafficking during the 30-day pause.
On Tuesday, China said it would levy a 15% tariff on coal and liquefied natural gas products. Beijing also planned to impose a 10% tax on crude oil imports, agricultural machinery and large-engine cars from the U.S.
"The U.S.’s unilateral tariff increase seriously violates the rules of the World Trade Organization," China’s State Council Tariff Commission said in a statement. "It is not only unhelpful in solving its own problems, but also damages normal economic and trade cooperation between China and the U.S."
The tariffs were set to take effect next Monday.
Trump said he planned to talk with Chinese President Xi Jinping in the coming days.
Bay Area small businesses brace for potential impact of tariffs amid uncertainty
Bay Area small business owners are concerned about the potential impact of tariffs on products imported from Canada and Mexico, which could lead to higher prices for everyday goods. While a temporary pause offers some relief, businesses like the Demented Sisters are worried about the long-term effects if the tariffs are enforced.