Washington – Gov. Gavin Newsom last week promised action in response to President Trump’s dramatic decision to increase tariffs on trading partners around the world. But if Trump passes with them, will he have the power to protect California’s economy?

Rebellion without a plan

His response was quick and powerful, and one of the first from the Democratic governor with national ambitions. California “will never sit vaguely during Trump’s tariff war,” he said Friday as the market fell over Trump’s new policies.

Trump returned his most dramatic threat on Wednesday, eliminating new tariffs in many countries for 90 days, significantly lowering others, including those targeting major trading partners such as South Korea, Vietnam and Japan. However, the 10% tariff rate remains in many allies. The president said it would impose a 125% import duties on all products from China, the US’s third largest trading partner.

Newsom has time to plan ahead, negotiate directly with global trading partners, launch bilateral negotiations, and send trade missions overseas. If Trump proceeds with a rate hike, these efforts can have a positive effect on the margin. For example, in previous tariff fights with Trump, Canada and the European Union, they aimed, for example, specifically on the red states, for retaliation.

But economists are skeptical that Newsom’s overture will meaningfully protect California businesses and consumers from potential fallout, especially as US and California businesses are affected by a complete trade war with Beijing.

California Industry at the intersection

The immediate problem with Newsom is that the value of California’s biggest industry, agriculture, digital, technology and entertainment, is exactly what it makes such an attractive target in a way that hurts such an attractive target for trading partners who want to oppose Trump.

Newsom said it would directly appeal to partners like China and the European Union for their desire to “exclude California-made products from retaliation.” But Trump’s widespread trade war makes it difficult to implement such exemptions. On the contrary, Chinese bloggers from the province are talking about Beijing, which is specifically targeting Hollywood. And before Trump suspends, French officials had urged EU counterparts to target digital and streaming services if negotiations with the Trump administration failed by the end of the month.

Regardless of how foreign it progresses, Newsom will have little power to mitigate the primary impact of Trump’s import obligations on California manufacturers and farmers, who rely on inputs from overseas to maintain their business, from agricultural ingredients to iPhone components. Every business in California with a remote, diversified supply chain will face rising costs outside of governor management.

“Newsom can seek protection from retaliatory tariffs for goods and services originating from California,” he said. Kenneth Rogoffa prominent economist and professor at Harvard University, “it’s not clear what he can offer in return for his sovereign nation.”

Economists are skeptical

Chris Thornburga founding partner at Beacon Economics and former director of the Economic Forecast and Development Center at the UC Riverside School of Business Center, said Newsom could do “almost” to isolate California from a potential trade war.

“According to the Constitution, the federal government has full control of diplomatic relations and borders. That was true when Texas tried to close the border to immigrants coming from Mexico, just as Newsom tried to open the border to foreign exporters,” Thornberg said.

“This is about the price of capital as much as the price of the goods. A fall in dollar means a higher interest rate,” he added. “There’s nothing Gavin can do to protect us from that.”

Newsom can try to roll back California-specific import regulations, hoping to make the California market more attractive to foreign companies. But it would do so much to help the state when those foreign companies are still facing historic federal duties.

“The state has largely controlled certain products, such as wine, for special historical reasons. For other products, it can make California regulations troubling. “Otherwise, his ability to bypass Trump’s tariffs is very limited.”

If Trump advances global tariffs this summer, the new rates are expected to negatively impact tourism to the US, where California is the best destination. Already, flight bookings from Canada have dropped by nearly 70% from last year’s location.

Slippery slope

Stan Vegaa senior researcher at the American Enterprise Institute in Economic Policy Studies and frequent visiting lecturer at Harvard called Newsom’s plans “completely unrealistic.”

“California cannot sign trade agreements or exempt certain products and industries from the new tariff regime,” Veuger said. “I think the California government can compensate households, businesses and industries against tariffs. But it requires other taxes to be raised to meet the state’s balanced budget requirements. The implications of distribution depend on tax increases.

At an unlikely event that Newsom will try to compensate for federal government policies, Veuger said California will face difficult questions about what constitutes California’s business. Out-of-state businesses will likely seek to benefit from policies and inflate the costs of state programs. And the transnational nature of California’s biggest corporations will put an impossible burden on Sacramento.

“Imagine the EU retaliation with a digital device tax on the EU revenue of certain high-tech companies,” Veuger said. “Does California compensate Facebook?”

Daniel JB Mitchell, a California economic expert and professor emeritus at UCLA, reflected Veuger’s concerns, saying Newsom’s options are “very limited.”

“In some cases, if a product is made in California, but there are inputs from other states, it can be difficult to define what a California product is,” Mitchell said. “It’s easy for the produce grown in California. However, the governor was unable to provide any customs return or return for such special treatment.”

Political opening

Newsom may have limited powers to respond to Trump’s trade war, but the potential economic crisis has already presented California governors with a gold mine of political opportunity.

Democrats struggled for months to respond to the fire hose of development from the Trump administration. They seem to be settling with the message that Trump has now abandoned the promise of a core campaign to lower prices and run through the economy responsibly.

Goldman Sachs, JP Morgan Chase and BlackRock all warned in the past week about weaker economic conditions, increased inflation and increased risk of a recession as a result of new tariff policies. As Trump paused for most of his plans, it remains unclear how their predictions will change. However, Newsom’s initial response to responding with resistance was another indication of his intentions, which stands out as a democratic figure of the nation.

He’s not the only one who wants that mantle. Another potential candidate for the president in 2028, Illinois Governor J.B. Pretzker, returned from Mexico on a trade mission this week.

“He basically shot the US economy with his feet. We’re all going to suffer From now on, Pretzker said in an interview with MSNBC before Trump overturned the course.

“Purchases of what they care about are rising, so people are starting to watch now,” he added.

What else should I read?

Must see: Trump’s tariff is another nail in ffin for Hollywood in China
Deep Dive: Trump’s threat does something unthinkable: Turning Canadians into flag-waving, American patriots
Rimes Special: From Bratz Dolls to Crusty the Clown: How Trump’s Tariffs are hurt

Come more,
Michael Wilner

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