Impact of New Government Policies on California: Preliminary Analysis

Key Chapter Title List

1. National-Level Impact
2. California-Specific Impact
3. Employment Overview
4. Housing Market
5. Logistics Industry and Lessons from the 2018-2019 U.S.-China Trade War
6. Summary

Document Introduction

With the new Republican administration taking office in the United States, its series of highly controversial economic policies have garnered widespread attention. These policies are likely not only to reshape the national economic landscape of the U.S. but also to have profound impacts on California. This report, released by the UCLA Anderson Forecast Center, provides a preliminary assessment and outlook on the economic impact of the new administration's core policies, based on realistic considerations of policy feasibility.

The report first analyzes the national-level policy framework and potential impacts. Core policies include imposing high tariffs on all goods from Mexico and Canada, raising tariffs on China by an additional 10 percentage points, deporting up to 1 million undocumented immigrants annually, and making the 2017 Tax Cuts and Jobs Act permanent. The study indicates that tariff costs are highly likely to be passed on to domestic U.S. prices, pushing inflation to around 3% in the short term; large-scale deportation of immigrants will lead to labor shortages in agriculture and construction, driving up wages but also intensifying food price pressures; the combined effect of these policies will cause U.S. GDP growth to fall below 2% in the second half of 2025, before gradually recovering.

In the section on California-specific impacts, the report focuses on four core areas: tariffs, immigration, taxation, and regulation. Regarding employment, California's 5.5% unemployment rate is already above the national average. Labor loss due to immigration policies will further impact industries reliant on foreign-born workers, such as healthcare, leisure/hospitality, agriculture, and food processing. The housing market faces a triple pressure of labor shortages, rising construction costs (due to tariffs increasing material prices), and declining demand in some regions. Housing prices in rural and inland low-income areas may fall as populations decline.

Regarding the logistics industry, drawing on lessons from the 2018-2019 U.S.-China trade war, the report finds that while tariffs caused a short-term decline in container throughput at California ports, supply chains gradually adjusted and adapted. In the long run, the sustained impact on port transportation is limited. At that time, reciprocal tariff increases between the U.S. and China led to a significant drop in bilateral trade volume, but California ports maintained business stability by diverting trade to other partners like Vietnam and Taiwan.

The report concludes by pointing out that the new administration's policies will have multifaceted impacts on California: rising inflation will harm those on fixed incomes and low-income groups; industries dependent on federal funding and foreign-born labor may contract; construction industry expansion will be hindered. However, technology and technology-intensive manufacturing are expected to benefit from policy support and increased demand for labor-saving equipment. It is projected that California's unemployment rate will rise to 5.8% and remain above 5% until the end of 2026. Future development still faces uncertainties such as the pace of policy implementation, disruptions to federal government operations, and escalation of trade frictions.