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.”
Business
After tip from California workers, Justice officials say company owes big money to employees, state
In 2019, construction workers raised alarms about a company building luxury apartments in Oakland that appeared to be skirting its financial obligations, both to the state and its employees.
That tip would set off a years-long investigation by the California Department of Justice, which accused the Kentucky-based company, US Framing West Inc., of violating state labor laws at that Oakland site, as well as committing tax evasion and wage theft in several other construction projects across the state, including some that had received public funding.
“While working these projects, we allege, US Framing West failed to pay more than $2.5 million in state payroll taxes,” Atty. Gen. Rob Bonta said at a Tuesday news conference. “We also allege that, at a public works project in Cathedral City, US Framing West also underpaid its workers by approximately $40,000.”
For the record:
6:47 a.m. Nov. 27, 2024The headline and article have been corrected to state that funds recovered by the DOJ would go to the state not federal government and that construction workers reached out to the union.
Bonta and his team have filed 31 criminal charges, including grand theft, payroll tax evasion, prevailing wage theft and filing false documents, against US Framing West and two of its employees.
“For some reason, US Framing West seems to think it can [operate] outside the bounds of California labor laws, thinks it can steal from California and from our workers,” Bonta said. “I’m here with a simple message: They cannot; no company can.”
The two employees, Thomas Gregory English and Amelia Frazier Krebs, as well as the company, pleaded not guilty in the case earlier this month, according to Los Angeles County Superior Court records.
Gary S. Lincenberg, an attorney representing English and the larger company, declined to comment on the specifics of the allegations but said, “We intend to address the AG’s concerns in court.”
“US Framing is a hard-working company with a great reputation,” Lincenberg said in a statement.
The attorney representing Krebs, Jeffrey Rutherford, said he and his client “intend to vigorously fight the charges.”
Between 2018 and 2022, US Framing West worked on several construction projects across the state, including in Alameda, Los Angeles, Contra Costa, Orange, Riverside, San Diego, San Francisco and Santa Clara counties, according to the attorney general’s office. In many cases, the company used crews of unlicensed subcontractors, who the state mandates be classified as company employees — triggering certain tax requirements, Bonta said. However, the company failed to appropriately file and submit taxes for those subcontractors.
Additionally, investigators found that US Framing West failed to fulfill requirements to pay a prevailing wage — typically a rate similar to that of unionized workers, often well above minimum wage for specialized jobs — on a public works project in Cathedral City. Public works projects are defined as those that use more than $1,000 of public funds.
Bonta urged any union worker, employee or concerned citizen to report other potential labor law violations to the Justice Department. The workers on that initial Oakland site were not unionized, but reached out to the Nor Cal Carpenters Union for help addressing alleged shortcomings by their employer.
“It is no accident that California boasts the fifth-largest economy in the world,” Bonta said. “It’s because we’ve got some of the strongest worker protections in the country. It’s because, in California, we stand up for our workers.”
Hundreds of hospitality workers at a Las Vegas casino walked off the job Nov. 15, launching the first open-ended strike in more than two decades for Nevada’s largest union.
The workers are members of the Culinary Workers Union as well as an affiliated bartenders union, which together represent some 60,000 workers in Las Vegas and Reno, including at most of the casino resorts on the Las Vegas Strip and in downtown Las Vegas.
The strike has grabbed headlines. Video of a protest last week posted to social media by the union showed members blocking a road in front of the hotel and police arresting union members.
The last time Las Vegas saw a similar labor dispute was in 2002, during a 10-day walkout by workers at the Golden Gate Hotel & Casino in downtown Las Vegas. It comes as Nevada’s gaming market and tourism activity on the Strip has been unexpectedly strong this year, dispelling investors’ expectations of a downturn in business.
Here’s what to know about the strike:
Why are the casino workers on strike?
With the strike in its second week, the Culinary Workers Union is hoping to pressure Virgin Hotels Las Vegas to agree to a new five-year contract with higher pay and better benefits for workers. The resort is located about a mile east of the Las Vegas Strip and houses more than 1,500 rooms and suites. The property is owned by several investment groups, including JC Hospitality and LiUNA Pension Fund of Central and Eastern Canada.
The hotel has balked at terms that other Las Vegas casinos consented to last year that gave workers a 32% raise over five years, said Bethany Khan, a spokesperson for the union.
Union officials said Virgin’s proposals have offered only meager wage boosts.
“Workers at Virgin Las Vegas deserve a first-class contract with fair wage increases, and they are organized and ready to strike for it,” Ted Pappageorge, secretary-treasurer of the Culinary Union, said in a recent statement.
What does Virgin say about all this?
The hotel contends that the union’s demands are too costly and unrealistic.
“The Culinary Union’s current demand is not financially sustainable for Virgin Hotels Las Vegas, and we will not agree to the same contract that led to layoffs at other properties,” the hotel said in a statement. “Virgin Hotels Las Vegas remains focused on reaching a reasonable agreement that secures a brighter future for all of our 1,710 team members and their families.”
The hotel said the union has not engaged in meaningful negotiations in recent months.
“Despite Virgin Hotels Las Vegas agreeing to many of the Culinary Union’s demands and showing flexibility on critical sticking points, the Culinary Union has not seriously countered any of our economic proposals,” the hotel said.
Is this going to disrupt my upcoming trip to Vegas?
Probably not, unless you have plans to stay at the Virgin hotel or visit its casino, in which case it’s possible you might encounter picketing workers. The culinary union has said its strike has impacted the hotel’s housekeeping, food and beverage departments, and several of its bars and restaurants.
But the hotel says its operations remain up and running through the strike.
“Despite the Culinary Union’s attempt to disrupt operations, Virgin Hotels Las Vegas is open for business and continues to provide a memorable guest experience and exceptional guest service,” the hotel said in a statement.
Are other hotel workers in Vegas likely to strike?
No. About a year ago, hotels and casinos along the Strip narrowly averted a strike involving tens of thousands of hospitality workers by agreeing to a breakthrough deal just before a strike deadline.
MGM Resorts International, the largest employer on the Strip, and Caesars Entertainment reached a deal covering more than 30,000 hospitality workers.
Is this walkout connected to the hotel strikes in Los Angeles I heard so much about?
No. The Las Vegas standoff is not tied to strikes at Los Angeles hotels that began last year and stretched into this year. Roughly 60 hotels originally involved in rolling strikes at properties in Los Angeles and Orange counties have reached deals, giving non-tipped workers a total hourly boost of about $10 over four years .
However, both strikes represent efforts by local hospitality unions to secure gains for their members, and both are affiliated with the powerful Unite Here. The unions have used some similar tactics, such as calling out what they describe as union-busting activity by hotels owned by other unions’ pension funds.
This year, Unite Here Local 11 — which represents Southern California hospitality workers — criticized a carpenters’ union pension fund that owns Hyatt Regency LAX. And in recent days, the Culinary Union leading the Vegas strike has criticized the Laborers’ International Union of North America, or LiUNA, which has a Canadian pension fund that serves as majority owner of Virgin Las Vegas.
Culinary union officials sent a letter to LiUNA leaders criticizing Virgin’s hiring of temporary workers to replace striking union employees.
Virgin confirmed it has relied on temporary workers to keep operations running. LiUNA did not immediately respond to a request for comment.
Business
They may look like $18 million in world-class electric guitars. They’re a con, officials say
More than 3,000 fake Gibson electric guitars have been seized through the Los Angeles-Long Beach port complex as part of a multiagency law enforcement investigation, making it the largest counterfeit musical instrument seizure on record, authorities announced Tuesday.
Africa Bell, port director for the Los Angeles-Long Beach Seaport, provided no details about suspects or details of the case because it remained active but said that the products — worth more than $18 million if they were legitimate — were probably destined for e-commerce.
Several red, black and orange electric guitars sat on stands and rested on tables as U.S. Customs and Border Protection officials announced the seizure during a morning news conference in Carson.
“These guitars you see on display around me and behind me may look real to you, but trust and believe they are not,” Bell said. “They are fraudulent, and they are part of a massive attempt to con the American consumer.”
The 3,000-plus Gibson guitars seized by U.S. Customs and Border Protection were likely destined for e-commerce, according to authorities.
(Genaro Molina / Los Angeles Times)
Bell said while most shipments comply with U.S. importation laws, many do not.
“Finding contraband illicit goods and revenue owed to the United States government in this massive amount of cargo arriving here every day is like trying to find the smallest of needles and the largest of haystacks,” she said. “It’s a significant undertaking. This past fiscal year we prevented the entry of over $2 billion worth of counterfeit products into the United States. This is the highest recorded value to date.”
The case is being investigated by the U.S. Customs and Border Protection, Homeland Security Investigations and the Los Angeles County Sheriff’s Department.
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