Business
Trump tees up tariff hikes on top trading partners. What's at stake for California?
WASHINGTON — When President-elect Donald Trump announced he would impose sweeping tariffs on key trading partners on his first day in office, he signaled a return to a favorite strategy: a reverse carrot-and-stick that applies the stick of dire consequences in order to force countries to give him what he wants. In this case, that means a tougher crackdown on illegal migration and the movement of drugs into the U.S.
The risk of applying this tactic to foreign trade is that the whole U.S. economy is so reliant on the status quo that any miscalculation could have damaging consequences, especially in California and other trade-dependent states.
To some extent, that happened in Trump’s first term, when selective tariff increases set off costly trade wars with China and others.
The fallout from tariffs could have major damaging effects on California’s globally integrated economy, affecting thousands of businesses and many more jobs, consumer prices and choices of goods. And, if trading partners retaliate, tariff increases could hurt the state’s sales of farm goods, electronics, transportation equipment and other leading exports. Mexico and Canada are the top two destinations for California exports, and China and Mexico account for the bulk of the state’s imports.
Even uncertainty over such possibilities can cause havoc in financial markets and raise fears of higher prices, as well as disruptions to vital businesses dependent particularly on Mexico and the Pacific Rim.
Trump posted on his Truth Social site late Monday that on his first day on the job he would impose 25% tariffs on all goods from Canada and Mexico, and also tack on an additional 10% levy on Chinese imports. He said these countries — which are the United States’ top three trading partners — would be paying the price for not doing enough on illegal migration and drugs flowing into the U.S.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” Trump wrote.
The reality is that illegal border crossings from Mexico have fallen dramatically in recent months as the Biden administration has tightened up especially on asylum arrivals.
And U.S. drug seizures along the Southwest border have changed little in recent years, according to Department of Homeland Security statistics.
For years, China has been a major producer of fentanyl coming into the U.S., and Trump said in his post that Beijing has failed to clamp down on drug suppliers as it had promised.
Canada is not a big source of illicit drugs or illegal migration into the U.S., although there has been a sharp increase in unauthorized crossings along the northern border in the last year, driven in large part by Indians. Trump didn’t explain why Canada was targeted, but some analysts said he may be viewing the drug and migration situation as a North American problem.
U.S. stock markets, which had been on a run in recent days, opened mixed Tuesday but ended the day higher, suggesting that investors are familiar with Trump’s playbook and that these three countries could avoid the tariffs if they present a credible plan to curb the drug supplies and secure the borders, said analysts at Capital Economics. Mexico staved off a similar Trump threat over illegal migration in 2019.
But Trump’s salvo just three weeks after the election, plus his frequent campaign promises of hiking tariffs, suggests that he will move more quickly in carrying out his trade agenda than in his first term.
Trump has said he would slap tariffs of 10% to 20% on goods from around the world, and up to 60% on imports from China.
The consequences could be dire for California’s economy, given its heavy trade with China and Mexico.
Imports from China ($120 billion) and Mexico ($62 billion) accounted for a full 40% of the $450 billion worth of foreign products that entered California last year. And Mexico, Canada and China rank as the state’s top three export markets.
Overall, international trade and investment and related commerce employ hundreds of thousands of Californians and are a major economic engine for the state.
At the Port of Los Angeles, China’s share of all cargo, as measured by containers, has fallen to 43% from 57% in 2022. But the Port of L.A., the busiest in the nation, has kept growing in overall volume due to increased shipments from other Pacific Rim countries.
With U.S.-China relations worsening over the last decade, many manufacturers in California, as elsewhere, shifted at least some production and suppliers away from China to other sites in Asia and also to Mexico. But the scale of tariffs that Trump is announcing, whether 10% across the globe or separate duties on Chinese, Mexican and Canadian goods, would be too great for other countries to make up.
Much of U.S. imports from China and Mexico are consumer goods and intermediate parts that go into autos, appliances and other products. Southern California apparel companies have for years been sending clothes to be sewn and finished in Mexico, duty-free. Vehicle components often cross North American borders back and forth several times before final assembly — and tariffs added along the way will mean higher prices for everybody.
Now those long-established supply chains may be in jeopardy as analysts expect Trump to try to remake trade deals with North American partners, among others, using tariffs and the big American economic market as leverage.
“It’s going to be a jolt to the system, and at the end of the day it will be impactful to consumer pocketbooks,” said Rachel Michelin, president of the California Retailers Assn. She said her member companies have been trying to get ahead of higher tariffs by ordering products before Trump takes office.
“From a California perspective, it’s going to be alarming because the cost of living here is higher,” Michelin said. “We really are pricing people out of living in California.”
In Trump’s first term, China and other countries hit back by raising tariffs on sensitive American farm goods, including soybeans and wine. But overall trade also slowed, with U.S. companies scurrying to file for tariff exemptions and trying to curry favor with his administration for relief.
Jock O’Connell, a California trade specialist at Beacon Economics, said the Trump administration’s trade skirmishes with China in 2017 caused a dramatic falloff in the state’s trade volume. California exporters learned to diversify their markets. This time around, he said, the state may have even fewer options.
“There’s not going to be a lot of political payoff” in helping California, O’Connell said. “Can you imagine [Gov.] Newsom flying to Washington to meet with trade officials in the White House to deal with tariffs?”
Greg Danenhauer, co-owner of Parker Boiler, a manufacturer in City of Commerce, said he still buys some steel and cast iron burners from China, but overall looks to China for less than 18% of his supplies, compared with as much as 25% in 2016. Parker Boiler also buys temperature controls and other products from Mexico.
Danenhauer said Trump’s earlier tariffs on Chinese products actually helped level the playing field for domestic makers such as himself. And he’s not worrying about higher tariffs down the road.
“To me, everybody is panicked about it,” he said. “But we don’t know yet” what’s coming, he said.
Dan Ujczo, a trade lawyer at the Ohio-based firm Thompson Hine, drew a distinction between Monday’s tariff announcement, which he said was “very tactical and transactional, targeted for a specific purpose,” and Trump’s plans on universal tariffs and those aimed at China. The latter “are more transformative or transitional when it comes to global trade,” he said, adding that they are likely to be proposed later and closer to when tax cuts and other fiscal plans are ready.
During his first term, Trump often used threats such as high tariffs to browbeat America’s allies into concessions. On defense policy, for instance, he famously raised doubts about continued U.S. participation in the North Atlantic Treaty Organization; European allies responded by boosting their contributions to the cost of mutual defense.
Chinese imports are already subject to U.S. tariffs of 10% to 25% stemming from Trump’s actions in his first term and which were left in place by President Biden. That helped Mexico overtake China in 2021 as the United States’ top two-way trading partner. Still, the United States’ biggest trade deficit, by far, remains with China, in excess of $279 billion last year, according to the Census Bureau.
Trump’s tariffs announced Monday, if implemented, would almost certainly cause significant disruptions for industries and raise consumer costs for gas, autos and all sorts of other products, possibly reigniting inflation, which appeared to be a key factor in his election victory.
The U.S. imported a total of about $1.3 trillion worth of goods from those three countries last year, and about two-thirds of that amount came in tariff-free, thanks to the U.S. free trade agreement with Mexico and Canada.
Despite that trade pact, experts said Trump could impose the tariffs by using the statutory authority under the International Emergency Economic Powers Act of 1977, which he cited extensively in his first term, including in his dealings with Mexico and China.
Whether tactical or not, the tariff threats could escalate — Mexico already said it could retaliate with counter-tariffs. And some economists warned that Trump’s plans could backfire.
“It’s a reckless grenade toss,” said Michael Clemens, an economics professor at George Mason University who specializes in international migration. “Harming American consumers and workers with a trade war will do nothing at all to address their concerns about immigration and drugs.”
As the war in Iran strangles the flow of oil around the globe, California’s jet fuel reservoirs are running low.
The state — which refines much of its own fuel in El Segundo and elsewhere but still relies on crude oil imports — has seen its jet fuel stock decline by more than 25% from last year’s peak to a level not seen since 2023, according to data from the California Energy Commission.
The supply is shrinking as a global shortage is already affecting travelers’ summer plans with canceled flights and higher fares. It could even affect plans for people coming to Los Angeles for the 2026 World Cup, which starts in June, said Mike Duignan, a hospitality expert and professor at Paris 1 Panthéon-Sorbonne University.
“People don’t know exactly how this is going to escalate,” he said. “There’s a huge black cloud over the sea for the World Cup and the travel slump that we’re seeing is all linked to this oil shortage.”
As fuel supplies shrink, flight prices are rising. Airlines are adding baggage surcharges to cover fuel costs. Several routes leaving from smaller California hubs, including Sacramento and Burbank, have already been canceled.
Air Canada has suspended flights for this summer, cutting routes from JFK to Toronto and Montreal.
“Jet fuel prices have doubled since the start of the Iran conflict, affecting some lower profitability routes and flights which now are no longer economically feasible,” the airline said in a statement last week.
Europe had just more than a month’s supply of jet fuel left last week, the International Energy Agency said. In an effort to cut costs, the German airline Lufthansa slashed 20,000 flights from its summer schedule this week.
Without a fresh oil supply flowing through the Strait of Hormuz, the situation is unlikely to improve, experts said. The oil reserves countries and companies have in storage are helping fill shortfalls, but the squeezed supply chain could still wreak economic havoc.
“When there’s a shortage somewhere, everything is affected,” said Alan Fyall, an associate dean of the University of Central Florida Rosen College of Hospitality Management. “Airlines are being cautious, and I would say that is a very wise strategy at the moment.”
California’s jet fuel stock reached its lowest levels in two and a half years at 2.6 million barrels last week, down from a peak of more than 3.5 million barrels last year.
The California Energy Commission, which tracks fuel inventory, said the state’s current jet fuel stock is sill sufficient.
“Current production and inventory levels of jet fuel are within historical ranges,” a spokesperson said. “Although supply is tight, no structural deficit has emerged yet. The present tightness reflects short‑term global market stress. As long as refinery operations remain stable, California is positioned to meet regional jet fuel needs.”
Europe has been affected more directly because it relies on the Middle East for the vast majority of its crude oil and many refined products, experts said. California gets crude oil from the Middle East but also from Canada, Argentina and Guyana.
The state has the capacity to refine around 200,000 barrels of jet fuel per day, most of it from refineries in El Segundo and Richmond.
The amount of crude oil originating in the state has been declining since the early 2000s, as state regulations and drilling costs have led to more imports.
California has become particularly vulnerable to supply-chain shocks like the war in Iran, says Chevron, one of the companies that provides jet fuel in the state.
“The conflict in the Mideast Gulf has exposed the danger of California’s decision to offshore energy production,” said Ross Allen, a Chevron spokesperson. “Taxes, red tape and burdensome regulations cost the state nearly 18% of its refinery capacity in just the past year, and we urge policymakers to protect the remaining manufacturing capacity.”
In 2025, 61% of crude oil supply to California’s refineries came from foreign sources, according to the California Energy Commission. Around 23% came from inside the state, down from 35% five years ago.
The state’s refining capacity has also been declining, said Jesus David, senior vice president of Energy at IIR Energy. The West Coast region’s refining capacity has decreased from 2.9 million to 2.3 million barrels a day since 2019, he said.
“California’s had issues prior to the war,” David said. “Nothing new has been built over the past 30 years, and California has closed a lot of capacity.”
The result is higher prices for both gasoline and jet fuel in the state. Jet fuel at LAX costs close to $15 per gallon this week, compared with almost $10 at Denver International Airport and $11 at Newark International Airport.
Gasoline prices have also been hit hard by the global conflict. Average gas prices in California are close to $6 a gallon, around $2 higher than the national average.
The West Coast is a “fuel island” because it’s not connected by pipelines to the rest of the country, United Airlines chief executive Scott Kirby said in an interview last month. That means oil and refined products have to be brought in by ships.
“Fuel price is more susceptible to supply weakness on the West Coast than anywhere else in the country,” Kirby said.
Some airlines might not survive the turmoil if oil prices don’t level out soon, he said. Spirit Airlines, a budget carrier based in Florida, is reportedly facing imminent liquidation if it isn’t bailed out by the Trump administration.
Nike is cutting about 1,400 jobs in its operations division, mostly from its technology department, the company said Thursday.
In a note to employees, Venkatesh Alagirisamy, the chief operating officer of Nike, said that management was nearly done reorganizing the business for its turnaround plan, and that the goal was to operate with “more speed, simplicity and precision.”
“This is not a new direction,” Mr. Alagirisamy told employees. “It is the next phase of the work already underway.”
Nike, the world’s largest sportswear company, is trying to recover after missteps led to a prolonged sales slump, in which the brand leaned into lifestyle products and away from performance shoes and apparel. Elliott Hill, the chief executive, has worked to realign the company around sports and speed up product development to create more breakthrough innovations.
In March, Nike told investors that it expected sales to fall this year, with growth in North America offset by poor performance in Asia, where the brand is struggling to rejuvenate sales in China. Executives said at the time that more volatility brought on by the war in the Middle East and rising oil prices might continue to affect its business.
The reorganization has involved cuts across many parts of the organization, including at its headquarters in Beaverton, Ore. Nike slashed some corporate staff last year and eliminated nearly 800 jobs at distribution centers in January.
“You never want to have to go through any sort of layoffs, but to re-center the company, we’re doing some of that,” Mr. Hill said in an interview earlier this year.
Mr. Alagirisamy told employees that Nike was reshaping its technology team and centering employees at its headquarters and a tech center in Bengaluru, India. The layoffs will affect workers across North America, Europe and Asia.
The cuts will also affect staffing in Nike’s factories for Air, the company’s proprietary cushioning system. Employees who work on the supply chain for raw materials will also experience changes as staff is integrated into footwear and apparel teams.
Nike’s Converse brand, which has struggled for years to revive sales, will move some of its engineering resources closer to the factories they support, the company said.
Mr. Alagirisamy said the moves were necessary to optimize Nike’s supply chain, deploy technology faster and bolster relationships with suppliers.
A bill that would have required insurers to offer coverage to homeowners who take steps to reduce wildfire risk on their property died in the Legislature.
The Senate Insurance Committee on Monday voted down the measure, SB 1076, one of the most ambitious bills spurred by the devastating January 2025 wildfires.
The vote came despite fire victims and others rallying at the state Capitol in support of the measure, authored by state Sen. Sasha Renée Pérez (D-Pasadena), whose district includes the Eaton fire zone.
The Insurance Coverage for Fire-Safe Homes Act originally would have required insurers to offer and renew coverage for any home that meets wildfire-safety standards adopted by the insurance commissioner starting Jan. 1, 2028.
It also threatened insurers with a five-year ban from the sale of home or auto insurance if they did not comply, though it allowed for exceptions.
However, faced with strong opposition from the insurance industry, Pérez had agreed to amend the bill so it would have established community-wide pilot projects across the state to better understand the most effective way to limit property and insurance losses from wildfires.
Insurers would have had to offer four years of coverage to homeowners in successful pilot projects.
Denni Ritter, a vice president of the American Property Casualty Insurance Assn., told the committee that her trade group opposed the bill.
“While we appreciate the intent behind those conversations, those concepts do not remove our opposition, because they retain the same core flaw — substituting underwriting judgment and solvency safeguards with a statutory mandate to accept risk,” she said.
In voting against the bill Sen. Laura Richardson, (D-San Pedro), said: “Last I heard, in the United States, we don’t require any company to do anything. That’s the difference between capitalism and communism, frankly.”
The remarks against the measure prompted committee Chair Sen. Steve Padilla, (D-Chula Vista), to chastise committee members in opposition.
“I’m a little perturbed, and I’m a little disappointed, because you have someone who is trying to work with industry, who is trying to get facts and data,” he said.
Monday’s vote was the fourth time a bill that would have required insurers to offer coverage to so-called “fire hardened” homes failed in the Legislature since 2020, according to an analysis by insurance committee staff.
Fire hardening includes measures such as cutting back brush, installing fire resistant roofs and closing eaves to resist fire embers.
Pérez’s legislation was thought to have a better chance of passage because it followed the most catastrophic wildfires in U.S. history, which damaged or destroyed more than 18,000 structures and killed 31 people.
The bill was co-sponsored by the Los Angeles advocacy group Consumer Watchdog and Every Fire Survivor’s Network, a community group founded in Altadena after the fires formerly called the Eaton Fire Survivors Network.
But it also had broad support from groups such as the California Apartment Association, the California Nurses Association and California Environmental Voters.
Leading up to the fires, many insurers, citing heightened fire risk, had dropped policyholders in fire-prone neighorhoods. That forced them onto the California FAIR Plan, the state’s insurer of last resort, which offers limited but costly policies.
A Times analysis found that that in the Palisades and Eaton fire zones, the FAIR Plan’s rolls from 2020 to 2024 nearly doubled from 14,272 to 28,440. Mandating coverage has been seen as a way of reducing FAIR Plan enrollment.
“I’m disappointed this bill died in committee. Fire survivors deserved better,” Pérez said in a statement .
Also failing Monday in the committee was SB 982, a bill authored by Sen. Scott Wiener, (D-San Francisco). It would have authorized California’s attorney general to sue fossil fuel companies to recover losses from climate-induced disasters. It was opposed by the oil and gas industry.
Passing the committee were two other Pérez bills. SB 877 requires insurers to provide more transparency in the claims process. SB 878 imposes a penalty on insurers who don’t make claims payments on time.
Another bill, SB 1301, authored by insurance commissioner candidate Sen. Ben Allen, (D-Pacific Palisades), also passed. It protects policyholders from unexplained and abrupt policy non-renewals.
-
Politics57 seconds agoTrump admin steps up next phase of effort to protect children’s health
-
Health7 minutes agoCarrie Ann Inaba shares her struggle to manage hidden, invisible illness: ‘It’s real’
-
Sports13 minutes agoOlympic legend Kaillie Humphries signs with activist sportswear brand XX-XY Athletics amid political rise
-
Technology19 minutes agoFCC router rule raises questions about future updates
-
Business25 minutes ago
California’s jet fuel stockpile hits two-year low as war strangles oil supplies
-
Entertainment31 minutes agoStagecoach 2026: How to watch Friday’s livestream with Cody Johnson, Ella Langley, Bailey Zimmerman
-
Lifestyle37 minutes agoL.A. Affairs: I loved someone who felt he couldn’t be fully seen with me
-
Politics43 minutes agoContributor: Carlson’s cautious apology does little to repair Trumpism’s damage