By Anita Hamilton

California is already taking a financial hit from tariffs, Gov. Gavin Newsom said Wednesday when announcing the state's lawsuit to block the Trump administration's sweeping levies on imports.

Citing the "toxic uncertainty" they have created, Newsom said the tariffs have resulted in a "significantly downgraded" economic growth for the state.

The lawsuit, filed in Northern California federal court, claims that the International Emergency Economic Powers Act invoked by President Donald Trump as justification for imposing the tariffs isn't applicable. It seeks "declaratory and injunctive relief to block the tariffs imposed by President Trump pursuant to IEEPA because they are not authorized by that statute."

In response, White House spokesperson Kush Desai said, "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."

Newsom detailed the impacts the tariffs have already had on California, which is by itself the world's fifth biggest economy and a major importer of goods from around the world. "No state has more to lose," he said, speaking at a Central Valley almond farm alongside state Attorney General Rob Bonta.

"The impacts on the budget on this state are already being felt," he said, adding that they have already forced him to revise his coming budget submission.

For example, the state is already collecting less revenue from capital-gains taxes on companies such as chip maker Nvidia, which is based in Santa Clara, Calif. "Nvidia's success plays an outsize role in the revenue we generate," he said.

As both the largest manufacturing state and agricultural exporter in the nation, California's economy is highly dependent on international trade. Computer and electronic parts are its largest manufacturing exports, while almonds, pistachios, and dairy are among its biggest exports.

California's total gross domestic product is around $4 trillion, behind only the U.S., China, Germany, and Japan in size.

The state's total merchandise trade reached $675 billion in 2024 or around 16% of its total gross domestic product, according to a Public Policy Institute of California report using federal data. Imports outpace exports by nearly three to one.

The suit comes two days after a group of private businesses filed their own suit challenging Trump's use of the same law, arguing that trade deficits weren't an emergency.

Since Trump announced widespread tariffs on imports to the U.S. on April 2, the stock market has had historic swings, some economists have raised their odds of a recession, and China has imposed its own tariffs of 125% on U.S. imports. Other countries are working on trade deals with the U.S., but for now, a baseline 10% tariff applies to most imports.

Write to Anita Hamilton at anita.hamilton@barrons.com

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April 17, 2025 16:26 ET (20:26 GMT)

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