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Donald Trump's threatened trade war would hurt California, report says

Donald Trump's threatened trade war would hurt California, report says
The Maersk Edmonton container ship delivers cargo at the Port of Los Angeles in April. (Christina House / For The Times)

Donald Trump's realpolitik could do serious damage to California's economy, a new report says.

Instigating a trade war with China – something Trump has said he would "love" to do – would cripple the surge in jobs in the state, according to the UCLA Anderson Forecast, a study released Wednesday.

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"For California a trade war will reduce the demand for labor. There goes that full employment," wrote Jerry Nickelsburg, an economist at UCLA who cowrote the report.

California is home to the largest port complex in the nation, at the Los Angeles and Long Beach ports, which together bring in nearly 40% of all the cargo that arrives by sea to the United States.

California has added jobs faster than the rest of the country for years. By 2017, the unemployment rate in the state will hit 4.9%, according to the report, which is lower than the current 5% rate of joblessness in the nation.

A tight labor market is good for workers, because it gives them leverage to ask for higher pay. When there are fewer workers available for hire, companies have more of an incentive to try to keep the people they have. Californians should expect a raise in the near future, the report said.

Employers who are worried about the new $15 minimum wage floor may be wasting their energy, since market forces will push pay up regardless of state policy, the report suggests.

"The near-term impact of increases in the minimum wage, coming at a time when wages are going up anyway, ought to be small," Nickelsburg wrote.

Still, there are threats to the state's economic progress. If Californians vote to maintain a tax increase on the state's wealthiest residents, which may appear on the November ballot, it could leave the state's revenue base vulnerable to ebbs and flows in financial markets, the report said.

In May, a coalition of labor and healthcare organizations said they had amassed more than 980,000 signatures for a proposition to extend higher tax rates on individuals earning more than $263,000 for 12 years.

The policy would make California even more dependent on the financial fortunes of the rich, which fluctuate based on the stock market, the report noted. "While it sounds reasonable that having the surtax extended will protect the budget, nothing can be further from the truth," wrote Nickelsburg.

Follow me @NatalieKitro on Twitter.

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