Trump’s tariffs predicted to cut California’s tax revenue by $16 billion

The finance team of Governor Gavin Newsom has warned in a memo that California could lose $16 billion in tax next year because of United States President Donald Trump’s tariffs. According to the memo, revenue in the fiscal year that starts in July will fall 4% from the state’s earlier forecast. Staff members think the drop is connected to a stock sell‐off that hit Wall Street after Trump set out a wide tariff push on April 2.The officials broke down the projected loss, noting that about $10 billion less from capital‐gains taxes, $2.5 billion less from corporate taxes, and roughly $3.5 billion less from personal‐income taxes tied to wages and business profits. “Trump’s tariff policies weakened the national and state outlook and caused equity losses,” the memo says. Officials add that these factors began to drag on California receipts in 2025 and erased the strong cash flow the state had seen earlier in the year.Newsome says the gap is the “Trump Slump”The report was first made by Politico, and the memo, which lands one day before the governor is due to unveil his new budget proposal for the coming fiscal year. California’s budget is dependent on the richest households. The top 1% of earners pay nearly half of all personal income tax, and much of that money hinges on capital‐gains income that follows the stock market.The new hit to the treasury comes on top of $27.3 billion in financial remedies. It includes $16.1 billion in cuts and a $7.1 billion removal from the state’s rainy‐day fund. California’s constitution requires a balanced budget each year, which means that any shortfall must be closed. Hence, this will be the third year in a row that Newsom and lawmakers trim spending after earlier budgets allocated more money than the state can spend on various programs.Trump’s tariff order in April placed duties on all imported goods, raised taxes on items from Mexico, Canada, and China, and set extra levies on products such as cars and aluminum. While the president has since eased some of those tariffs, Newsom argues that the policy and the uncertainty around it will raise unemployment and inflation, lower gross domestic product, and shrink capital‐gains revenue for California.The post Trump’s tariffs predicted to cut California’s tax revenue by $16 billion first appeared on Coinfea.