With voters set to choose a new governor, several statewide officeholders, state legislators and members of Congress in just two months, candidates up and down the ballot are making plenty of promises. But the state’s slow bleed of employment, particularly in the industries that once defined its economy, has barely registered as a campaign issue.

The numbers tell a sobering story. California has never fully rebounded from the pandemic-era shutdown, and more than a million residents remain out of work. The state’s unemployment rate is among the highest in the nation, and long-standing economic engines such as technology and film production have been losing jobs for years rather than adding them.

A closer look at the data suggests the problem runs deeper than the headline figures indicate.

“California’s labor market is holding up, but its foundations remain troublingly narrow,” said Justin Niakamal, research manager at Beacon Economics, in a recent assessment of the state’s economic health. According to Niakamal, healthcare stands out as essentially the only sector posting solid job growth.

That might sound like good news, but healthcare employment in California leans heavily on government spending — both state and federal — and both sources of funding have been tightening. Unlike technology, agriculture or entertainment production, healthcare also doesn’t generate the kind of added economic value that builds broader prosperity; it’s a service sector, not a wealth-creating one.

The state’s official unemployment rate stood at 5.1% in July, trailing only Connecticut and Oregon, which each posted 5.2%. That figure reflects the share of the labor force without any job, including part-time work, during the month measured.

But the size of the labor force itself tells its own story. Over the past year, California’s labor force — those working or actively looking for work — shrank by 286,300 people, according to the state’s Employment Development Department. That decline tends to soften the official unemployment number, masking a more significant erosion in actual jobs. It’s also worth noting that anyone who works even a few paid hours in a month counts as “employed” under the standard measure.

Federal officials calculate more nuanced figures that paint a starker picture. One of these, known as the U-6 rate, accounts for underemployment — people working part-time who want full-time jobs, along with those only loosely attached to the labor force. California’s U-6 rate hit 10.3% in June, the highest of any state in the country.

For comparison, the U.S. Bureau of Labor Statistics also calculates U-6 figures for a few large counties and cities whose populations rival entire states. New York City came in at 10.2%, while Los Angeles County’s rate reached 12.1% — even worse than the statewide figure.

Yet even those numbers may not capture the full extent of the problem. The Ludwig Institute for Shared Economic Prosperity has developed what it calls a “true rate of unemployment,” which goes a step further than U-6 by excluding jobs — even full-time positions — that pay below what it considers a living wage, set at $26,000 annually. The institute frames this as a measure of “functional unemployment.”

Unsurprisingly, California’s numbers under this framework are alarming, particularly in rural areas dependent on agricultural work. Redding tops the list with a “true unemployment” rate of 67.4%, according to the institute’s regional breakdown. Several other rural and semi-rural areas fall between 50% and 65%. Even major urban centers aren’t spared — the Los Angeles-Long Beach-Anaheim metro area registers 53.8% under this measure. Only a handful of California regions dip below the 50% mark.

Given the scale of these figures, one might expect California’s candidates and elected officials to be laying out plans to address the state’s employment crisis. So far, that conversation has been notably absent from the campaign trail.

Original source: CalMatters

The post California’s Job Losses Mount, but Candidates Stay Quiet on the Issue appeared first on The Hemet & San Jacinto Chronicle.

Their local economies grew up around an industry built on an ever-expanding inmate population, most of it shipped in from California’s big cities. But roughly 15 years ago, state lawmakers rewrote sentencing laws, shrinking the prison population and setting off a wave of closures. Then-Gov. Jerry Brown oversaw sharp reductions in the 2010s, and Gov. Gavin Newsom has shuttered five state prisons since taking office in 2019. Now several of the towns that once depended on those institutions are grappling with hard choices about their future. One is still fighting the closure of its prison. Another is banking on new businesses to fill the gap. And a third — Susanville, tucked deep in Lassen National Forest — is isolated, remote and arguably in the toughest spot of all.

Sitting near one of the last major stops before Reno and the high desert, Susanville has long been the kind of place California sends things it would rather not think about.

“Prisons in communities are not popular, so they tend to be located in areas that have severe economic distress,” said Dan Newton, who spent 20 years working for the city of Susanville and recently served as its city manager. “That describes this area perfectly.”

In 2021, city officials learned the prison would close. They went to court to challenge the decision, arguing the state’s environmental review process had failed to account for how the closure would devastate the local economy. Newsom’s response was a budget bill that exempted prison closures from that environmental review altogether.

“At first there was a lot of panic,” said Susanville Mayor Mendy Schuster. “Houses went up for sale. People left town. State jobs are good jobs with good pay, and people were going to leave.”

Since the closure was announced, Susanville’s population has slid from about 16,000 in 2021 to roughly 14,000 in 2024, the most recent year for which American Community Survey data is available.

Not all 1,100 former prison employees left town. Some transferred to a nearby facility; others retired and stayed. Still, the local elementary school lost 10% of its enrollment between 2021 and the 2025-26 school year.

The town’s isolation is also part of its charm. The surrounding landscape offers some of the most striking scenery in far Northern California — sweeping desert views framed by the Cascade Range, where it meets the Sierra Nevada.

This region’s history follows a familiar pattern: the state or federal government tells residents they’re needed — to mine gold, log timber, guard the people sent to prison — and then eventually shows up to say their services are no longer required.

Susanville the landscape remains unchanged, a striking mix of geological features. But Susanville the incorporated city is running out of time.

“We’re heading toward insolvency,” Newton said before stepping down as city manager to take a position with Tehama County government.

The prison-building boom

Back when California’s three-strikes law handed mandatory life sentences to repeat violent offenders, the state needed places like Susanville to house its swelling inmate population.

According to Brown University’s Prison Proliferation Project, state and federal governments operated 511 prisons in 1970. By the time the nationwide prison construction boom ended around 2000, that number had climbed to 1,663.

Correctional officers who settled in Susanville coached Little League teams and bought bread from the local bakery. They held stable jobs with strong health and retirement benefits — today, experienced correctional officers earn a base salary of $9,650 a month.

The city benefited from sentencing policies that shipped inmates hundreds of miles from their families, and Lassen County even counted those incarcerated individuals as residents until 2022, building its identity around a prison boom that seemed like it would never end.

Until, of course, it did.

In 2006, overcrowding forced some of the state’s 170,000 inmates to sleep in hallways and multipurpose rooms. But by the early 2010s, sentencing reforms shifted more people into county jails rather than state prison, and those who were incarcerated served shorter terms. Today, the California Department of Corrections and Rehabilitation houses about 90,000 inmates statewide — with roughly 8,000 more beds than people to fill them.

Over the past 15 years, researchers have increasingly studied what’s become known as the era of “mass prison closure,” when shutdowns have outpaced new construction. Criminal justice policy experts have found that the economic benefits prisons were long assumed to bring to small, rural communities were probably overstated from the start.

“A large share of prison jobs were filled by residents of neighboring towns,” researchers wrote in a 2024 paper published in Punishment & Society. “Even those who relocated to work at the prisons often settled in adjacent communities, providing little direct benefit to the local economy.”

A landmark 2010 study by researchers at Washington State University found that prisons may not have driven meaningful economic growth at all — and might have actually discouraged other industries from developing nearby.

John Eason, an associate professor of sociology at Brown University and author of “Big House on the Prairie,” which examines a rural Southern prison town, found that a prison town’s economic fate has more to do with when it built its prison than where.

“Towns that embraced prison construction early in the boom saw a short-term benefit compared to those that didn’t, but the effects weren’t lasting,” Eason wrote.

Communities that built prisons early in the boom saw median home values and incomes rise, along with dips in poverty and unemployment — but those gains faded within about a decade, something Eason called “a decay effect.”

Residents and city leaders in Blythe, however, where the now-shuttered Chuckawalla Valley State Prison opened in 1987, are convinced their economic troubles began — and ended — the day the prison closed in 2022.

A desert town’s failed fight

“To be honest, I don’t think they care,” said Blythe Mayor Joseph DeConinck. “We still haven’t gotten anything from the state. It pains me to say it, but Blythe is in the middle of nowhere. We’re the farthest from Sacramento, and again, we’re just a handful of votes.”

The mayor of this small Riverside County desert town near the Arizona border watched Susanville’s lawsuit over its prison closure fail, and chose not to pursue similar legal action after Newsom ordered Blythe’s prison shuttered just before Christmas 2022.

Instead, Blythe took a different approach — leaning into diplomacy rather than confrontation, launching a lobbying push to convince state lawmakers and the governor that the city needed some form of economic assistance.

So far, that effort has produced nothing.

“We took on these prisons when nobody else wanted them,” DeConinck said. “And we adapted around them because they became a major economic driver for our area.”

Blythe’s population, which stood at 18,000 in 2022, dropped to about 17,400 by 2024, the most recent year with census data available. A 3% population decline might not sound dramatic, but Blythe was already struggling well before the prison closed.

The city’s population has been shrinking since it peaked at roughly 20,000 in 2010. A Riverside County civil grand jury investigation in June 2022 found that Blythe couldn’t keep up with its bills, that residents were leaving for Phoenix or the Coachella Valley, and that neither the city nor its people had especially promising prospects ahead.

Six months after that investigation, Newsom announced the prison closure.

DeConinck said city leaders traveled to Sacramento seeking help, without success. He recalled a meeting between Blythe’s city manager and the governor’s representatives in which, he said, the city was promised direct financial assistance.

The era of trying to charm the state into helping is over, DeConinck said.

“They wouldn’t even talk to us,” said Vice Mayor Johnny Rodriguez. “They’re not doing anything to help us because they’ve got this political mantra that all prisons are bad.”

Rodriguez said the California Department of Corrections and Rehabilitation and the Department of General Services sent representatives to a meeting about the shuttered prison’s future. It didn’t go well.

“We only had one meeting with a potential developer who showed some interest, and all the state told us was what can’t be done and what they won’t do,” Rodriguez said. “They won’t even give us a timeline to start talking about it, so what good is that?”

Newsom’s office referred questions to the California Department of Corrections and Rehabilitation.

Will Matthews, a spokesperson for the department, said after this story initially published that the state sent $995,000 to the Riverside County Workforce Development Division in August 2024.

“In July 2024, state representatives met with local leaders to discuss these resources and other available assistance,” Matthews said. “There was no commitment to provide direct financial assistance to the city of Blythe.”

Matthews said that until the Blythe prison’s infrastructure is separated from the neighboring Ironwood State Prison and outstanding bond obligations are resolved, the property cannot move through the state’s surplus property disposal process.

At a March hearing before a state Senate budget subcommittee, corrections secretary Jeff Macomber said he’s eager to relinquish his agency’s oversight of closed facilities.

“I don’t want to maintain closed facilities,” Macomber said. “Believe it or not, I have to provide some staffing. It’s unpopular, there are security risks. People break in — because who wouldn’t want to break into a closed prison?”

Newsom began shutting down prisons with the closure of the Deuel Vocational Institution near Tracy, followed by the Susanville facility and then the prison near Blythe. The state also ended its contract with a private prison in Kern County, a site that now operates as an immigration detention facility. A prison in Norco, also in Riverside County, is scheduled to close in October.

More closures are likely. This year, the Legislature approved a budget anticipating the shutdown of at least one more facility, reflecting Democratic lawmakers’ push to save roughly $150 million annually per prison by eliminating underused facilities.

Some state prisons also carry massive deferred maintenance bills. Last week, the state auditor released a report estimating that five facilities need $2.4 billion in repairs.

Rodriguez continues pushing for a new prison to be built on the closed site. He hopes to pitch the federal government on opening a women’s facility there, as a form of compensation for the closure of FCI Dublin, which shut down after 10 correctional officers were charged with sexually abusing female inmates.

“Closing Chuckawalla was a mistake,” said Assemblymember Jeff Gonzalez, a Coachella Republican. “For our rural communities, these facilities are critical sources of employment that sustain families and local economies.”

Ready for change on the edge of the Bay Area

If any town was prepared for a prison closure, it was Tracy.

Optimism runs high there — even the city’s website touts it as “one of the fastest-growing suburbs in the San Francisco Bay Area.” For decades, Tracy has served as a bedroom community for commuters heading into the East Bay and San Jose.

According to San Joaquin County Supervisor Robert Rickman, who served as Tracy’s mayor from 2016 to 2020, interest in redeveloping the closed prison site has been steady.

“We’ve been in contact with people in agriculture, in education, and even some interested in opening a casino,” Rickman said. “I’d say the prison closure was neutral. The property isn’t sitting abandoned. The southern part of the county is a thriving area.”

Rickman said correctional officers and support staff were largely transferred to the California Health Care Facility in Stockton.

“I guess you’re never really ready for a closure,” Rickman said, “but the good news is nobody lost their job.”

Tracy has advantages Susanville lacks — proximity to Interstate 5, a busy commercial corridor, and a growing, populous region of the state. It also avoids the extreme heat and water uncertainty that plague desert communities like Blythe.

Rather than fighting the state the way Blythe has, Rickman has focused on courting business prospects.

Back in Susanville, getting any company to return a phone call has proven to be a struggle.

Hard choices in Susanville

“Over the last two years, we’ve adopted deficit budgets,” said Newton, the former city manager. “We’re spending more than we can cover to fill public safety vacancies, and rising expenses are outpacing our revenue growth.”

“This is going to start eating into our cash reserves.”

The city is hoping some industry — any industry — will come in and turn things around. City leaders hold out little hope for state assistance. But Susanville also faces its own built-in obstacles.

For one, Newton said it’s difficult to persuade companies along the California-Nevada border to choose the California side, given higher taxes and stricter regulations — a dynamic economists call regulatory arbitrage.

Second, industry needs power, and Susanville doesn’t have much capacity on its electrical grid or the infrastructure to support heavy use. A strong thunderstorm can knock out power to half the town. The city’s transmission lines simply can’t handle the demands of heavy industry.

Third, the area’s small population works against it. Prisons bring in workers and the state supplies the labor force — but there’s no broad pool of workers to draw from for other industries. When prisons close, guards are transferred elsewhere or retire and leave a remote, geographically isolated area behind.

The pandemic didn’t help either. Downtown businesses were already struggling as more shopping moved online, a trend that never reversed once lockdowns ended, Schuster said.

These days, some of the city’s biggest tax revenue sources come from online sales tax and fuel taxes — drivers stop in Susanville to fill up because it’s home to the only gas stations within 20 miles in any direction.

Last year, a baseball grandstand burned down. In March, a lumber mill that employed about 30 people caught fire. No one was hurt, but the mill was destroyed.

Now, the roughly 8,000 people who call this remote corner of California home are left asking what else the land can offer, what else can be built, what else might sustain them. One idea under consideration: a new truck stop.

Whatever rescue eventually comes for the town, Newton said, likely won’t come from the same state government that built the prison and then walked away from it.

“Nobody’s coming to save us.”

Original source: CalMatters

The post California Prison Towns Scramble for New Jobs After Closures: ‘No One’s Coming to Save Us’ appeared first on The Hemet & San Jacinto Chronicle.

Roughly 15 years ago, both towns were relatively stable, propped up in large part by steady state jobs at nearby correctional facilities. Prison employment brought reliable paychecks and benefits that helped sustain local businesses in these remote pockets of California. But as sentencing reforms reduced the state’s prison population, Gov. Gavin Newsom moved to shutter facilities across the state — five so far, with a sixth in Norco set to close this October. Lawmakers also approved budget language this year calling for at least one more closure, a move that could save the state roughly $150 million annually, though that provision has not yet become law.

The fallout in these smaller communities has been significant.

In Blythe, a desert city near the Arizona border, Newsom ordered the closure of Chuckwalla Valley State Prison in 2022. The announcement came as the city was already struggling — its population was shrinking as residents moved toward Phoenix or the Coachella Valley, and a county audit that same year found Blythe couldn’t keep up with its own bills.

City officials have pressed state lawmakers and the governor’s office for economic assistance, but so far nothing has come through.

“Be honest with you, I don’t think they give a shit,” Blythe Mayor Joseph DeConinck said. “We still haven’t got nothing from the state. I hate to say it, but Blythe’s in the middle of nowhere, we’re the furthest from Sacramento … we’re only a few votes out here.”

Susanville, tucked into the Lassen National Forest in far Northern California, is facing similar strain. After its prison closure was announced in 2021, Mayor Mendy Schuster said residents began listing their homes and leaving town almost immediately. The city’s population dropped from about 16,000 in 2021 to 14,000 by 2024.

“We’re heading toward insolvency,” said Dan Newton, Susanville’s former city manager.

Neither town has received a clear plan from the state for economic recovery, raising questions about what long-term support — if any — will be offered to communities left behind by California’s shrinking prison system.

In other statewide news, the race for California insurance commissioner is drawing attention for its ideological divide. Former San Francisco Supervisor Jane Kim, who has proposed a state-backed natural disaster insurance program and expanded access to low-cost auto insurance, topped the June primary field — a sign her progressive platform is connecting with voters frustrated by rising insurance costs. Her opponent, state Sen. Ben Allen of El Segundo, finished second and has earned the state Democratic Party’s endorsement, positioning himself as the more institutional choice. UC Irvine law professor Shauhin Talesh said the contest reflects a broader split within the party nationally over how aggressively government should intervene in the insurance market.

Meanwhile, a high-stakes trial got underway this week in an Oakland federal courtroom, where Meta faces accusations from California and dozens of other states that it deliberately engineered Facebook and Instagram to hook young users, despite internal awareness of the potential harm to their mental health. States also allege Meta unlawfully collected data from children under 13. If the tech giant loses, damages could reach as high as $1.4 trillion, along with mandated changes to how its platforms operate. California Attorney General Rob Bonta said in a statement that “exploiting our most vulnerable residents to boost corporate profits is not only morally wrong, it’s also illegal.” Meta maintains the lawsuit misrepresents its efforts, saying it has made “real changes to protect teens online.”

Closer to home for Inland Empire families, a state-funded database that gave California’s K-12 schools free access to research materials, encyclopedia entries, PBS videos and academic journals has lost its funding after lawmakers made cuts this year. CalMatters and PBS SoCal have produced a video segment examining the impact on classrooms that relied heavily on the resource, which aired as part of the SoCalMatters series on PBS SoCal.

Original source: CalMatters

The post Prison Closures Left Small Towns Reeling. Here’s How They’re Coping appeared first on The Hemet & San Jacinto Chronicle.

Blythe, a Riverside County city near the Arizona border, and Susanville, in the far northeastern corner of the state, both lost their prisons in recent years. A third community, Tracy in San Joaquin County, appears to be weathering its own prison closure with far less pain. The contrast between the three offers a stark lesson in how geography, timing and existing economic conditions determine whether a town survives losing its largest employer.

Gov. Gavin Newsom has shut down five state prisons since taking office in 2019, continuing a decline in the incarcerated population that began under former Gov. Jerry Brown. California’s prison system once held more than 170,000 inmates and forced overcrowded facilities to bunk people in hallways. Today, the population has fallen to roughly 90,000, leaving the state with about 8,000 more beds than prisoners. Lawmakers this year approved a budget calling for at least one more closure, citing the roughly $150 million in annual savings each shuttered prison represents.

For Blythe, the closure of Chuckwalla Valley State Prison in late 2022 compounded problems that were already building. The city’s population had been sliding since 2010, and a Riverside County investigation completed just six months before the closure announcement found Blythe struggling to pay its bills as residents left for Phoenix or the Coachella Valley.

Blythe leaders chose not to sue the state, unlike officials in Susanville, and instead pursued a lobbying campaign asking Sacramento for economic assistance. City officials say that effort has largely gone nowhere.

“We took these prisons when nobody else wanted them,” said Mayor Joseph DeConinck. “And we adapted to them because they became a strong economic generator for our area.”

Vice Mayor Johnny Rodriguez said state officials have offered little beyond restrictions on what can’t be done with the vacant site. “They’re not doing anything to assist us because they have this political mantra that all prisons are bad,” he said.

The California Department of Corrections and Rehabilitation said in a statement that nearly $1 million was directed to the Riverside County Workforce Development Division in 2024 and that state representatives met with local leaders that July, though no direct financial assistance to the city was promised. Officials said the property can’t be released for redevelopment until infrastructure tied to the closed prison is separated from the neighboring Ironwood State Prison and related bond obligations are settled.

Rodriguez said he’s now pursuing a long-shot idea: pitching the site to the federal government as a potential women’s prison, following the shutdown of the scandal-plagued Federal Correctional Institution in Dublin. Assemblymember Jeff Gonzalez, a Coachella Republican, has called the Chuckwalla closure “a mistake” that stripped a rural community of a critical employer.

Corrections Secretary Jeff Macomber told lawmakers in March that the agency wants to relinquish control of shuttered prison properties as quickly as possible, citing security risks and the cost of maintaining empty facilities.

Susanville’s experience has followed a similarly rocky path, though its remote location in the Lassen National Forest, hundreds of miles from major population centers, presents different obstacles than Blythe faces. When the state announced in 2021 that it would close the prison there, city officials went to court, arguing that California hadn’t properly studied the closure’s impact under state environmental law. Newsom’s administration responded by pushing through budget legislation that exempted prison closures from that review process altogether.

“There was initially a lot of panic,” said Susanville Mayor Mendy Schuster. “Houses went on the market. People left town. State jobs are good jobs with a good income, and they were going to leave.”

The city’s population dropped from about 16,000 in 2021 to 14,000 by 2024, according to Census data, and elementary school enrollment fell 10% over roughly the same period. Former City Manager Dan Newton, who left the position recently for a job in Tehama County, said Susanville has been running deficit budgets for two years just to keep public safety positions filled.

“We’re heading toward insolvency,” Newton said.

Attracting new industry has proven difficult. Susanville sits near the Nevada border, making it easy for businesses to choose lower-tax, lighter-regulation Nevada instead. The local power grid can’t support heavy industrial use, and the area lacks the workforce base that large employers typically need. A recent lumber mill fire and the earlier loss of a baseball grandstand have only added to the sense of decline. One idea now under discussion: a new truck stop.

“No one is coming to save us,” Newton said.

Tracy, by contrast, has barely stumbled. The Deuel Vocational Institution near Tracy closed in 2021, but the city’s position along Interstate 5 in a fast-growing corridor of the Bay Area’s outer suburbs has drawn interest from agricultural, education and even casino developers eyeing the vacant property. San Joaquin County Supervisor Robert Rickman, who served as Tracy’s mayor from 2016 to 2020, said most displaced prison staff transferred to the California Health Care Facility in Stockton without losing their jobs.

“I guess you’re never really prepared for a closure,” Rickman said, “but the good thing is that nobody lost their jobs.”

Researchers who study rural prison economies say the pattern playing out across these towns tracks with what they’ve found elsewhere: the economic benefits of hosting a prison were often overstated from the start, since many jobs went to workers commuting from neighboring communities rather than local residents. Studies also suggest that towns which built prisons early in the state’s decades-long prison boom saw only short-lived gains in income and housing values before those effects faded — what one researcher called a “decay effect.”

More closures may be coming. Beyond Blythe, Susanville and Tracy, the state also ended its contract with a private prison in Kern County — now operating as an immigration detention facility — and a prison in Norco is scheduled to close this October. A state audit released last week found that five aging prisons statewide would require a combined $2.4 billion in deferred repairs, adding financial pressure that could accelerate the state’s exit from more communities that once depended on the industry to survive.

Original source: CalMatters

The post As Prisons Close, California Towns Search for What Comes Next appeared first on The Hemet & San Jacinto Chronicle.

The SBA limited access to its loans to U.S. citizens and nationals only starting in March, and expanded that policy to SBA-backed loans beginning in April. On top of that, any business that’s even partly owned by a permanent legal resident with a green card is no longer eligible for the loans.

California — which has the most small businesses and the largest immigrant population in the nation — could be most affected. SBA loans have been important to immigrant entrepreneurs because they typically are low-interest and available to those without an established credit history. The agency has also backed loans by private funders, providing a government guarantee for people banks may deem riskier. Now, all those loans are off the table for owners and would-be owners of restaurants, bake shops, law practices, medical clinics, taxi medallions, nail salons and more who hold green cards.

Small business owners are responsible for 99% of net new jobs in the state, according to the California Office of the Small Business Advocate. Immigrant entrepreneurs make up 40% of the state’s business community and generated $28.4 billion in income in 2023, according to GO-Biz, the governor’s office of business and economic development.

Small Business Majority, a national business advocacy group, wrote to the SBA in mid-March, urging the federal agency to reconsider the changes. The letter, signed by dozens of state and national groups and chambers of commerce, called the new policies “a misguided approach that ignores critical economic data underscoring the job creating power of the immigrant community.”

The SBA has a limited lending capacity, said Maggie Clemmons, a spokesperson for the agency. “The agency’s rule change will help ensure more American citizens have access to funding previously granted to noncitizens,” she said in an email.

The SBA approved 3,358 loans for small businesses owned partly by a lawful permanent resident in fiscal year 2025, largely during the Biden administration, Clemmons said. That represented 4% of the 85,000 loans approved by the agency. In California, the changes could affect about 220,000 small business owners who hold green cards, said Carolina Martinez, chief executive of CAMEO Network, a national association of organizations that support small businesses.

“The most important thing for us is to really understand that this SBA decision… is really bad for the American economy,” Martinez said.

Pursuing the American Dream

Cristina Foanene, a Romanian immigrant who arrived in the United States 20 years ago, was a green-card holder when she obtained an SBA loan in 2018 that allowed her and her husband to buy a building and expand their glass company, MCS Glass, in Fresno. They now have 30 employees.

“The loan gave us an opportunity to create more jobs, to have an even greater impact in our community,” Foanene said. Their goal is to manufacture more products and create more positions, she added.

She said she doesn’t know where the business would be today without the SBA loans they received over the years. They just signed their third loan last month, Foanene said, their first as American citizens.

She called herself loyal to this country and said she’s sad that others like her may not have the same opportunities to pursue the American Dream by securing SBA loans while “respecting the laws.”

“It literally breaks my heart,” Foanene said. “There are so many good people with good intentions. I feel it’s unfair.”

Other entrepreneurs or independent contractors also lose a possible safety net that SBA loans once provided.

“During the pandemic, these loans were crucial to people’s survival,” said Dung Nguyen, program and organizing director for California Healthy Nail Salon Collaborative, an organization that advocates for Vietnamese immigrants, many of whom work in the nail-salon industry. The group signed the Small Business Majority’s letter to the SBA.

Nguyen said the nail-salon workers and owners who took out those loans during the pandemic are still paying them back.

‘A new kind of status’

Kenia Zamarripa, spokesperson for the San Diego Regional Chamber of Commerce, which also signed the letter to the SBA, said this latest policy change is another example of how immigrants are more vulnerable as federal funds for other programs have been taken away. Her group and others are pushing for immigration reform that includes a standardized path to citizenship, she said.

“This is a community that’s doing things the right way, looking for a legal path,” she said. “It’s like you’re punishing them for doing the right thing.”

The SBA changes push green-card holders to “informality,” Zamarripa said. “What’s next? What other resources will be taken away? How else will immigrants continue to be targeted?”

Others echo that concern.

“This dialog is really challenging our concept of what undocumented means,” said Gabriela Alemán, a spokesperson for Mission Asset Fund, a San Francisco organization that supports and lends to small business owners. “These are community members that are now being pushed into a new kind of status.”

Mission Asset Fund’s lending circles — modeled after the Mexican community-based lending practice called tandas — can provide up to $2,500 in loans to small business owners. The group just got its California lenders’ license and will eventually be able to provide larger loans, Alemán said.

But it will be tough for groups like it to fill the gap left by the SBA’s new policies for permanent legal residents who may want to start or grow their businesses.

“There are not any other options at this scale (that the SBA provides),” said Brian Kennedy Jr., entrepreneur ecosystem director at AmPac Business Capital, a Los Angeles-area community development financial institution and SBA partner. “We’re talking about $35,000 up to $30 million.”

What’s next

Many small business owners already use — and may increasingly rely on — community development financial institutions and other lenders whose mission is to help people with limited options, credit histories and savings. They could also turn to the state for help. State-funded options include a small business loan guarantee program through its IBank, and programs through the treasurer’s office that reduces risks to lenders by pledging state funds as collateral, or contributing to loan-loss reserves.

Microenterprise Collaborative of Inland Southern California works with lenders, technical assistance providers and community partners to help small business owners in Inland Southern California.

Pamela Deans, the group’s executive director, said the SBA’s policy change will alter how the organization refers entrepreneurs to sources of capital. Rather than pointing them to “a relatively straightforward” SBA process, she said the group will have to inform them of a more fragmented set of options and warn them about predatory lending.

“Many of these would‑be owners will have a much harder time piecing together enough safe, affordable capital to lease a space, buy equipment or cover early working capital — so the taquería, the child care business, the trucking startup may never open in the first place,” Deans said.

Bianca Blomquist, California director for Small Business Majority, also is concerned about small business owners turning to unscrupulous lenders. She said her group found out recently that an owner of a child care business in downtown L.A. took out a $10,000 loan at what she thought was 13% interest. It was actually closer to 250%.

Other advocates are hoping philanthropy and impact investors will step up and make more capital available to small lenders.

“Women, entrepreneurs, immigrants and communities of color always have had to think outside the typical paths,” said Leticia Landa, executive director of La Cocina, a small business incubator in San Francisco. “I do hope, especially in California, that we’re going to come up with something.”

The post Big change for California small businesses: No more SBA loans for non-citizens appeared first on The Hemet & San Jacinto Chronicle.

California’s artificial intelligence boom isn’t sustainable and could fade as soon as this year, budget experts are warning. Meanwhile, departures driven by the wealth tax proposal could cut deeply into state revenues.

For Gavin Newsom, the timing could hardly be worse.

“If there’s an AI crash, that would be very difficult to navigate through,” said Darry Sragow, a longtime Democratic strategist in the state. “And it’s hard to imagine this ballot measure having a positive impact on much of anything.”

Newsom, a likely 2028 presidential contender, has for years counted on tech industry innovation and taxes from California’s wealthiest residents to finance his biggest progressive projects, projecting California as an economic powerhouse. But now in his final year as governor, he is suddenly confronting the twin threats of a billionaire exodus and a potential slowdown in AI growth that could upend both California’s reputation as a tech behemoth and the state’s fragile revenue stream.

Together, they represent a major political liability for the high-profile Democrat, who is laboring to position California as a model worth replicating on a national stage.

“Investment in AI and data centers and all of the build out we’ve seen cannot indefinitely continue,” warned Matt Mahan, the Democratic San Jose mayor who is considering his own run for governor. “And I don’t currently believe that Sacramento is properly positioned for an inevitable slowdown in the economy.”

And though Mahan, leader of Silicon Valley’s most populous city, is a frequent critic of the governor, he is far from the only Democrat who sees liability for Newsom.

“It does put the governor in a tough situation, because he is trying to do this last year where he can go around touting accomplishments,” said Andrew Acosta, a Democratic political consultant in Sacramento. “If the next governor comes in and says, ‘We’ve got to clean up the mess that the last governor made,’ that’s not going to be helpful for him.”

Newsom this month pitched a brighter version of California’s financial picture than independent experts at the Legislative Analyst’s Office, the state’s nonpartisan budget watchdog. His office projected a relatively small, $2.9 billion deficit buoyed by AI industry revenues, compared to the $18 billion gap the LAO anticipated in its own estimates last November.

“Every year, it’s the same kabuki,” Newsom told reporters last week. “I don’t think there’s been a lot of evidence since they put out their first forecast that we’re wrong.”

State Finance Department spokesperson H.D. Palmer said the governor’s plan identifies an AI downturn as a budget risk but doesn’t “assume a recession” will happen this year, as the LAO did.

“If we could project with relative certainty the specific time point when a market downturn could occur, we should be playing the Sportsbook in Vegas,” Palmer said.

But even Newsom acknowledged last week that “something could happen, a ‘black swan’ event … Don’t think for a second I’m static, looking at the budget, assuming anything. We game all this stuff out.”

Newsom, who has railed against the wealth tax, told POLITICO last week that he’s been working quietly to reach a compromise before the initiative qualifies for California’s November ballot, including meeting with a top labor union official spearheading the effort.

Still, the possibility that it might go forward threatens to accelerate the exodus of uber-wealthy magnates and the business activity they fuel. Last month, the Legislative Analyst’s Office and the Finance Department projected the wealth tax could reduce state revenue by hundreds of millions of dollars a year in the “likely” scenario that some billionaires leave California and take their income with them.

That would dramatically eclipse tens of billions of dollars that the agency said the state would “probably” collect from the tax, which would target five percent of billionaire assets. Meanwhile, tax loopholes and the volatile stock market make the exact amount hard to predict.

“If a lot of billionaires left, all those things combined could certainly then have a really negative impact on the state’s budget,” said Chris Hoene, executive director of the nonpartisan California Budget and Policy Center.

Or as Michael Genest, who was top financial adviser to Republican former Gov. Arnold Schwarzenegger in the lead-up to the Great Recession, put it: “Of the two big pictures — one, stock market crash, two, billionaires leaving — either one by itself would be catastrophic for the California state budget.”

He said, “Our budget is heavily, heavily reliant on the upper income people in the state and on the stock market.”

California’s dependence on the fortunes of a few top earners has led to several massive budget gyrations since the turn of the century, with downturns following the so-called “dot-com bubble” in the early 2000s and the Great Recession later that decade.

Facing deficit budgets in the last three years, Newsom has proposed tough cuts, including a measure last year to curb access to Medi-Cal for some undocumented immigrants. But he’s ramped up spending overall, from $208 billion in his first fiscal year as governor to a proposed $349 billion starting in July. To offset recent funding shortfalls, California’s relied on its booming AI industry.

But budget analysts point to high rates of investor borrowing and sluggish job growth as evidence that the sector is a “bubble” that’s at risk of popping. Even AI titans like Mark Zuckerberg and Sam Altman have suggested their industry’s rapid growth isn’t sustainable.

“California and Silicon Valley in particular, was built on bubbles,” said Larry Stone, a Democratic donor and longtime Silicon Valley investor who served 30 years as a county assessor in the region. “What’s happening now with AI is, in fact, kind of classic.”

On top of that, Newsom is contending with a Trump administration that has scrambled world markets with tariff threats while targeting blue states, especially California, with federal funding cuts to health care, food aid, and other programs. Those cuts have blown holes in the state’s budget even as AI revenues pour in.

“The stars are aligned for a nightmare scenario,” said Steve Maviglio, a longtime Democratic political consultant in Sacramento and frequent critic of the governor.

Last week, the LAO slammed Newsom’s budget for painting what it argued was an overly optimistic financial picture that disregarded the possibility of a stock market downturn tied to AI. Agency staff wrote that the risks were “severe enough that not incorporating them into this year’s budget, as the Governor proposes, would put the state on precarious footing.”

California’s progressive tax system relies heavily on personal income and capital gains taxes from high-income earners, many of whom work in tech. The state has raked in cash as firms like Nvidia, Meta and Google offer top AI talent lucrative pay packages that often include stock options.

It also means the state is more exposed if AI stocks tumble.

If billionaires leave and the AI boom recedes, said Senate Budget Committee Vice Chair Roger Niello, a Republican, “that would be a real double whammy. There’s no doubt about that — and a pretty serious one.”

AI industry leaders are bullish, saying the sector will furnish California’s coffers with billions of dollars in future tax revenue, a major boon for the state economy. ChatGPT-maker OpenAI estimated in its own economic report from last July that the company and its employees will contribute nearly $200 million in state taxes this year — and will contribute around $6 billion in total economic impact in 2030.

Yet those figures assume an AI bubble does not “pop” between now and the end of the decade. They also rely on continued high-tech chip research powering AI systems and a breakneck pace for data center construction, even as Democrats propose AI regulations to safeguard against spiking utility bills.

If those trends don’t hold and AI companies fail to show signs of turning a profit this year, experts say the firms risk souring their standing with investors, which could discourage new investment in the sector.

Still, Hoene said “it’s also important to recognize that we don’t know a downturn is coming.”

Yet the potential for a downturn is causing even some lawmakers in Newsom’s party to pour cold water on Newsom’s more optimistic outlook. Assemblymember Nick Schultz, a Democrat from Burbank, said during a legislative hearing this week that while he wants to “share the optimism of the administration,” he agrees with the LAO’s more conservative numbers over “concerns about the health of the stock market and how that might impact revenues.”

“We’re banking our budget on an economy fueled by AI, for all intents and purposes,” added state Sen. Laura Richardson, a Los Angeles Democrat.

Newsom, for his part, has taken counter-measures to guard against a budget crisis. He’s shielded the AI industry from state Democrats’ most aggressive proposals to regulate the emerging technology, while state Attorney General Rob Bonta last year approved OpenAI’s high-stakes corporate restructuring after getting concessions from the company, which had begun to hint it might move out of state along with its billions if it didn’t get its way.

The state has built up its reserves in the years since the Great Recession, allowing it to weather shocks such as the economic effects of the Covid-19 pandemic and inflation better than prior decades. Newsom’s latest budget proposal contains $23 billion in reserves, and the state can borrow money from other funds as long as it is repaid.

Even some Republicans admit the state’s in a better spot under Newsom.

“We have more in reserves. Our cash position is much healthier,” Niello said, comparing the state’s situation to 2008. But he added: “If we’d have put all that surplus away in the reserves, we wouldn’t be anywhere near the problem we have right now.”

There’s a chance that the AI math works out in Newsom’s favor. If industry giants keep booming and California rakes in more tax revenue than expected, it would put California in an even stronger position a year from now. And as proponents behind the wealth tax struggle to win over other labor unions, a mass exodus of billionaires could peter out.

If both issues go his way and state revenues keep climbing, Newsom could leave office on a high note, able to boast that he kept the world’s fourth-largest economy humming while ushering in a wave of progressive policies.

“Governors have to tell the story of their state. That’s how they get nominated to be the candidate.” said Doug Herman, a Democratic strategist in Los Angeles who was a lead mail strategist for Barack Obama’s 2008 and 2012 campaigns. “You have to leave the place cleaned up and in good order.”

Recently, Newsom has also closed budget gaps primarily through deferrals and borrowing from reserves, helping to avoid tax hikes while still spending more to create programs that funded housing construction and established universal pre-K for four-year-olds, among other priorities.

Those moves, however, were made with the hope that California’s economic outlook would improve in future years.

“The gimmicks, one-time stuff, borrowing the use of your reserves — those things all come back to bite you,” Genest said.

Chase DiFeliciantonio contributed to this report.

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Governor Gavin Newsom touted new data from the International Monetary Fund (IMF) and the US Bureau of Economic Analysis showing California’s growth.

The data shows California’s gross domestic product (GDP) hit $4.10 trillion (£3.08 trillion) in 2024, surpassing Japan, which was marked at $4.01 trillion. The state now only trails Germany, China and the US as a whole.

“California isn’t just keeping pace with the world – we’re setting the pace,” Newsom said.

The new figures come as Newsom has spoken out against President Donald Trump’s tariffs and voiced concern about the future of the state’s economy.

California has the largest share of manufacturing and agricultural production in the US. It is also home to leading technological innovation, the centre of the world’s entertainment industry and the country’s two largest seaports.

Newsom, a prominent Democrat and possible presidential candidate in 2028, filed a lawsuit challenging Trump’s authority to impose the levies, which have caused disruption to global markets and trade.

Trump has enacted 10% levies on almost all countries importing to the US, after announcing a 90-day pause on higher tariffs.

Another 25% tariff was imposed on Mexico and Canada. The levies on China, however, have led to an all-out trade war with the world’s second largest economy.

Trump imposed import taxes of up to 145% on Chinese goods coming into the US and China hit back with a 125% tax on American products.

His administration said last week that when the new tariffs were added on to existing ones, the levies on some Chinese goods could reach 245%.

Newsom noted his worries about the future of the state’s economy.

“While we celebrate this success, we recognise that our progress is threatened by the reckless tariff policies of the current federal administration,” he said. “California’s economy powers the nation, and it must be protected.”

Trump has argued his trade war is only levelling the playing field after years of the US being taken advantage of.

The tariffs are an effort to encourage factories and jobs to return to the US. It is one major pillar of his economic agenda, as is a cut in interest rates, aimed at reducing the cost of borrowing for Americans.

The new data shows California’s GDP behind the US at $29.18 trillion, China at $18.74 trillion and Germany at $4.65 trillion. It also shows California was the fastest growing among those countries.

Japan’s economy is under pressure because of its decreasing and ageing population, which means its workforce is shrinking and social care costs are ballooning.

This week, the IMF cut its economic growth forecast for Japan and projected that the central bank would raise interest rates more slowly than previously expected because of the impact of higher tariffs.

“The effect of tariffs announced on April 2 and associated uncertainty offset the expected strengthening of private consumption with above-inflation wage growth boosting household disposable income,” its World Economic Outlook report said.

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Newsom announced the state’s new economic ranking Wednesday after recently released data from the International Monetary Fund and the U.S. Bureau of Economic Analysis indicated that California’s nominal gross domestic product now exceeds Japan’s.

According to the data, California’s nominal GDP reached $4.1 trillion, surpassing Japan’s $4.02 trillion. That places the Golden State behind only the United States at $29.18 trillion, China at $18.74 trillion, and Germany at $4.65 trillion.

“California isn’t just keeping pace with the world — we’re setting the pace,” Newsom said in a statement. “Our economy is thriving because we invest in people, prioritize sustainability, and believe in the power of innovation.”

Of the top-four global economies, California’s is also the fastest growing, according to data and Newsom’s office. Its nominal GDP grew at a rate of 6% in 2024, outpacing the U.S.’s overall 5.3% rate, China’s 2.6% rate and Germany’s 2.9% rate.

Newsom attributed California’s showing to a growing population and record tourism spending coupled with a high concentration of venture capital and new business ventures. He also touted the strength of the state’s agricultural, high-tech and manufacturing centers.

While celebrating the milestone, Newsom also took a swing at President Trump’s tariff policies.

“While we celebrate this success, we recognize that our progress is threatened by the reckless tariff policies of the current federal administration,” he said in a statement. “California’s economy powers the nation, and it must be protected.”

Last week Newsom announced a lawsuit challenging Trump’s executive authority to enact international tariffs without the support of Congress, calling the president’s economic policies a “wrecking ball” to America’s global reputation.

The legal action argues that the International Emergency Economic Powers Act that Trump cited to impose tariffs does not grant the president the ability to unilaterally adopt tariffs on goods imported to the U.S.

“No state is poised to lose more than the state of California,” Newsom when announcing the lawsuit. “That’s why we’re asserting ourselves on behalf of 40 million Americans.”

The last time California advanced in world economic ratings was 2018, when its nominal GDP surpassed the United Kingdom’s to move into fifth place. India’s economy, which is currently $3.90 trillion, is predicted to overtake California’s in 2026, according to current data trends.

Times staff writer Taryn Luna contributed to this report.

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The lawsuit, which Newsom and Attorney General Rob Bonta filed in federal court in San Francisco, argues that Trump does not have the constitutional authority to unilaterally enact tariffs. Trump cited the United States’ large trade deficit to declare a national emergency earlier this month and impose sweeping import taxes on the rest of the world.

Visiting an almond farm in Turlock, which stands to lose export business to retaliatory tariffs, Newsom expressed anger over the “toxic uncertainty” of the president’s trade policy. He said the policies are harming California more than any other state and called the tariffs a betrayal of the voters who supported Trump because of his promise to bring down the cost of living. 

“This is recklessness at another level. The geopolitical impacts are outsized. The trade impacts are outsized,” Newsom said. “No rationale, no plan, no conscience to what it’s doing to real people.”

In a matter of days in early April, Trump invoked the International Emergency Economic Powers Act of 1977 to establish a universal 10% tariff on all countries importing goods to the United States, with even higher reciprocal tariffs on some nations, then abruptly reversed course hours after they took effect, pausing most of the reciprocal tariffs while ratcheting up the import tax on China to 145%.

The chaos tanked the stock market, a huge risk for California’s forthcoming budget, which depends disproportionately on income tax revenue from capital gains earned by the wealthiest taxpayers. The state is also particularly vulnerable to other economic pain from the tariffs, because China is California’s largest trading partner, propping up manufacturing, agriculture, tourism and major ports in Los Angeles, Long Beach and Oakland.

Other significant potential impacts for California include driving up the cost of construction materials just as Los Angeles begins rebuilding from a series of devastating fires that flattened several neighborhoods in January.

California’s economic outlook is declining

Newsom said today that, anticipating higher inflation and higher unemployment from the tariffs, he has downgraded California’s economic outlook in a revised budget proposal that he plans to unveil next month. Though did not speak to Trump about the lawsuit, he said he gave the White House a heads up.

In a statement, the White House slammed Newsom for undermining Trump’s efforts to rescue American industry.

“Instead of focusing on California’s rampant crime, homelessness, and unaffordability, Gavin Newsom is spending his time trying to block President Trump’s historic efforts to finally address the national emergency of our country’s persistent goods trade deficits,” spokesperson Kush Desai said.

In their lawsuit, the fifteenth that California has filed against the Trump administration since January, Newsom and Bonta asked a judge to immediately pause Trump’s tariffs.

The state contends that the International Emergency Economic Powers Act specifies many remedies a president can take in response to a foreign economic threat, but tariffs are not among them. Without this specific authorization from Congress, the lawsuit argues, Trump’s actions are “unlawful” and “unprecedented.”

Joining Newsom in Turlock, Bonta said Trump was “attempting to override Congress and steamroll the separation of powers” and that his “rogue and erratic tariffs” must be stopped to prevent further damage to California’s economy.

“Trump has had to resort to creating bogus national emergencies that defy reason,” Bonta said. “Bottom line: Trump doesn’t have the singular power to radically upend the country’s economic landscape. That’s not how democracy works.”

Alan Sykes, who teaches international trade law at Stanford Law School, told CalMatters that California’s case has merits, but it may be difficult to win.

He said the international powers act is ambiguous about tariffs; they are not explicitly mentioned in the law, though there is language allowing for the regulation of imports and exports. But Congress has also passed other laws over the years giving away their constitutional power to set tariffs. Sykes noted that Trump could shift to citing those statutes instead if his tariffs are struck down.

“Congress has badly over-delegated authority to the president in this regard,” Sykes said. “I’m not terribly optimistic that the courts are going to rein that in.”

The lawsuit continues Newsom’s shift back toward a more aggressively confrontational stance against the Trump administration. After the Los Angeles wildfires, the governor sought to reset his relationship with Trump as he lobbied for federal disaster aid.

But even though Congress has yet to approve any further assistance for Los Angeles, Newsom has begun more vocally opposing the president’s economic policies in recent weeks. 

In the wake of Trump’s tariffs announcement earlier this month, Newsom said California would pursue its own “strategic partnerships” on international trade. The state this week launched a new tourism campaign in Canada, which has been the second largest source of international visitors to California but has already seen a steep decline this year.

Newsom was unusually harsh when speaking about Trump’s tariffs in Turlock, calling them the “poster child” for stupidity and an example of “crony capitalism” because of the president’s willingness to exempt products from favored industries such as electronics manufacturing.

“This is the personification of corruption,” Newsom said. “How in the hell are we sitting by and letting this happen?”

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The majority of the lumber that the store sells comes from Canada and nearly all of its steel products are made in China, general manager Rieff Anawalt said. Those countries, along with Mexico, have been targeted in sweeping tariffs imposed by President Trump during his second term, sparking a global trade war that intensified this week.

“These tariffs are 100% going to impact us,” Anawalt said. Wholesale reps for the family-run hardware company, which has five locations around Los Angeles County, have warned him to expect prices to go up by April 1 — costs that he said he’ll have to pass on to customers.

“We’re going to see major increases: 15% to 25% across the board in this industry,” he said. “It’ll make COVID prices seem cheap.”

Across California, businesses of all kinds — farmers, automakers, home builders, tech companies and apparel retailers — are reeling from weeks of on-again, off-again tariff chaos as Trump has announced a slew of levies against the country’s top three trading partners, implementing some while modifying, delaying or reversing others.

“It’s a day-by-day soap opera, and just like a soap opera, you get relief, then it heats up again,” said Jonathan D. Aronson, a professor of international communication and international relations at USC.

As a result, business owners “don’t know what’s going to happen,” he said. “They can’t plan. They don’t know how much to produce. They don’t know who their business partners are going to be.”

This month has been particularly tumultuous. On March 4, Trump’s 25% tariffs on imports from Canada and Mexico kicked in, with a limit of 10% on Canadian energy; he also doubled the tariff on all Chinese imports to 20%. All three countries vowed to strike back with their own measures.

The next day, Trump granted a one-month exemption for U.S. automakers on his new tariffs on imports from Canada and Mexico. The day after that, he said he was postponing many of the tariffs on Canadian and Mexican imports for a month.

On Monday, in a blow to farmers in California and across the U.S., China imposed retaliatory duties of up to 15% on American agricultural products including chicken, corn, beef, pork, wheat and soybeans. Then on Wednesday, Trump’s 25% tariffs on all steel and aluminum imports went into effect.

To counterbalance the effects of the tariffs on their bottom lines, businesses may have to overhaul their operations, said Jerry Nickelsburg, faculty director of the UCLA Anderson Forecast.

“The way in which firms react to that uncertainty is to not put all their eggs in one basket,” he said. “So they cut back on how much they would order, which means they’re going to produce less and they need fewer people — or if not fewer people, fewer hours for the people they have.”

The latest volley came Thursday morning, when Trump threatened to place a 200% tariff on wine and liquor from the European Union in response to the EU proposing a 50% tariff on American whiskey. About an hour later, he wrote in a follow-up post on Truth Social that the U.S. “doesn’t have Free Trade. We have ‘Stupid Trade.’”

“The Entire World is RIPPING US OFF!!!” he said.

Bolstering the economy was one of Trump’s core promises during the election, and tariffs are key to his strategy. He threatened to slap tariffs on Mexico, Canada and China on his first day back in office, explaining the decision as a way to crack down on illegal immigration and drugs.

But the escalating trade tensions have pummeled Wall Street for three weeks. On Thursday, the S&P 500 closed in correction territory, ending the day down 1.39%; the index is now 10.1% below its record close Feb. 19. The Dow Jones Industrial Average fell 537.36 points, or 1.3%, closing at 40,813.57.

The fallout for farmers

The prolonged back-and-forth has also unsettled companies, both those that import goods from abroad and those that sell their products to foreign clients. California’s economy could be especially hard hit because of its heavy reliance on trade with China and Mexico, and because of its position as a global agricultural powerhouse.

California farmers grow the largest share of the nation’s food — more than a third of the country’s vegetables and more than three-quarters of its fruits and nuts are grown here — and the state’s fertile ground is a major supplier of produce to countries around the world. Farmers also rely heavily on fertilizer from Canada, which could cost more as the tariffs take hold.

“Farmers in California are going to be hurt particularly badly because almonds, soybeans and things like that are huge exports of the United States,” Aronson said.

The state also accounts for about 85% of wines produced in the United States and is home to thousands of grape growers and wineries, many of them small and generations-old. The Wine Institute says the industry supports employment for more than 420,000 Californians and generates $73 billion in economic activity in the state. Canada is the largest market for California wine.

A flurry of activity at the ports

Some L.A.-area companies have been stockpiling inventory to get ahead of expected price hikes tied to the tariffs, said Stephen Cheung, chief executive of the Los Angeles County Economic Development Corp.

“A lot of them were hit pretty hard during the last trade war with China,” he said, “so they knew better than to wait and hope for the best.”

That has been reflected in shipping data from the ports in Long Beach and Los Angeles, which continue to record huge numbers thanks to several months of front-loading cargo ahead of Trump’s inauguration.

The Port of Long Beach moved 765,385 twenty-foot equivalent units, or TEUs, in February, a 13.4% increase from the previous year. January’s year-over-year growth was even larger: 952,733 TEUs — a unit of measurement based on the volume of a standard shipping container — were moved, representing a 41.4% increase.

After Trump launched a trade war with China during his first term, the Port of Long Beach lost about 20% of expected Chinese cargo in 2019, Chief Executive Mario Cordero said. That was supplemented by a 10% increase of imports from countries in Southeast Asia including Vietnam, Indonesia and Thailand. He expects the same thing to happen this time around.

In the coming months, Cordero said the local economy could see supply-chain disruptions, similar to what occurred during the pandemic, “if we continue on the path of aggressive and high-percentile tariffs.”

The Port of Los Angeles expects a 10% reduction in volume from last year amid Trump’s tariffs against China, Executive Director Gene Seroka said.

One of the largest seaports in the country, the L.A. port has seen sharp increases in cargo since last summer as businesses stocked up in anticipation of potential Trump tariffs. Just under 10.3 million TEUs, a near record, passed through the port last year.

Those numbers are likely to trend downward as tariffs take hold and the economy adjusts, Seroka said. “Fewer containers mean fewer jobs.”

Economists say it’s difficult for companies to quickly change suppliers, and some may be loath to upend their supply chains given the ever-changing nature of Trump’s trade policies.

Some are trying anyway.

Francesca Grace, an interior designer and home stager in Los Angeles, said tariffs have already affected the availability and price of items including fabrics, wood and other building materials, and smaller decor pieces.

Supply chain delays have extended her project timelines in some cases to three to six weeks from immediate availability, and she’s contending with “at least a 25% rise” in costs for materials from China. As a result, she’s now trying to source all of her products locally, up from 75%.

“While this shift aligns with our values, it will also cause our pricing to increase,” Grace said. “We are doing everything we can to avoid increasing our pricing too much. The last thing we want is for these changes to negatively impact our business or make our designs inaccessible.”

Other businesses say they have little choice when it comes to where they get their merchandise.

“Lumber prices are what they are. There’s no sourcing it somewhere else, so we’re going to have to deal with it as it comes,” said Anawalt, the general manager at the Malibu hardware store. “It’s so beyond my control, there’s nothing I can do. I was panicked at first, but now I’m just going to wait.”

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