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Mass deportations promised by President-elect Donald Trump could have a seismic economic effect in California — potentially inflicting billions of dollars in direct damages to a wide range of industries, including small business, agriculture, construction and child care, advocates and academics said.

The impact could also spread outward to other sectors, including growth drivers like tech.

The Golden State relies heavily on the labor of immigrants, whether they’re naturalized U.S. citizens, have temporary visas or are undocumented. More than 10 million, or 27%, of California’s population is foreign-born, according to the most recent U.S. Census data. Roughly a fifth of those are thought to be undocumented; as of 2022, estimates ranged from 1.8 million undocumented immigrants, according to the Pew Research Center, to 2.4 million, according to the left-leaning Institute on Taxation and Economic Policy. 

If undocumented immigrants “magically disappear, you’re going to erase 10% of California production,” said Giovanni Peri, professor of international economics at UC Davis. “We’re talking about hundreds of billions of dollars.”

The loss of workers only speaks to part of the financial impact of deportations. Undocumented immigrants also power the state’s economy as consumers and taxpayers. 

There may also be indirect impacts from the deportations. The loss of workers in construction, agriculture (including the state’s world-famous wine industry), hospitality and the care economy would have ripple effects on the rest of the state, according to Manuel Pastor, professor of sociology and American studies and ethnicity at the University of Southern California. 

“Behind every software engineer is an army of nannies, food-service workers and gardeners,” Pastor said. 

Pastor thinks businesses are likely to protest significant cuts to their workforces given how tight the labor market is. “They’ve come for the tax cut, they didn’t stay for stripping away their labor force,” he said, referring to business owners who supported Trump.

At his campaign rallies, Trump has said immigrants are “attacking” Black and Latino Americans’ jobs. Federal data undermines that claim, instead showing foreign-born, noncitizen Black and Hispanic workers predominantly work different types of jobs than their native-born counterparts. 

It could be costly to replace those who are deported. In the construction industry, for example, the median weekly earnings of full-time, U.S.-born workers as of 2020 were $1,031 vs. $786 for foreign-born workers, according to an analysis by the Bureau of Labor Statistics. In California, the median hourly wage as of 2021 was $30 an hour for U.S.-born workers vs. $24 an hour for immigrant workers vs. $16 an hour for undocumented workers, according to the California Immigrant Data Portal, a project by the Equity Research Institute at USC, which is directed by Pastor.

Even if Trump does not fully carry out his plan — or takes a long time to do so — the mere threat of deportations will have an economic impact, said Maria Lemus, executive director of Vision y Compromiso, a national community-based organization started in San Francisco that supports promotores, people who serve as liaisons between immigrant communities and health and social service providers.

“There will probably be a lot of people not going to work for fear of getting picked up,” Lemus said. “Employers will suffer the repercussions of this also.”

If a segment of the population goes into hiding, they will earn less and spend less, she said. Their kids — who are likely U.S. citizens — may not go to school, either, Lemus added. 

And undocumented immigrants contribute not just their labor, they also pay significantly into government coffers. In 2022, they paid $8.5 billion in local and state taxes in California, according to a national study by the Institute on Taxation and Economic Policy. Mass deportations would lead to lost sales, property and income taxes paid by those immigrants — including into programs they have never drawn from because they can’t, such as unemployment insurance benefits, or, until recently, Medi-Cal. 

Then there are the immigrants who have legal status and may be in the state for different reasons, such as for temporary work. During the campaign this time around, Trump and Vice President-elect JD Vance mentioned that they would also target the Temporary Protected Status program, which allows immigrants to stay in this country and work legally if their countries are determined to be unsafe.

The Trump administration may also target different visas that allow people born elsewhere to come to California to work in the fields (the H-2A visa), or in the tech industry (the H-1B visa). During his first term, Trump loosened rules for the issuing of visas for temporary workers such as the ones who worked for businesses he owned, and tightened rules for H-1B visas. 

The U.S. approved more than 46,000 H-1B visas for California employers in September, according to the most recent U.S. Citizenship and Immigration Services data. About 30% were for Google, Meta and Apple.

Preparing for what Trump’s deportations could bring

Chris Iglesias, CEO of Unity Council, a nonprofit affordable-housing developer that also provides social services to thousands of residents of Oakland’s Fruitvale neighborhood, said people there are alarmed but not panicked. 

Iglesias said there is “a lot of Trump-proofing” going on at organizations such as his, which serve low-income and marginalized communities that include undocumented immigrants. 

Though President Joe Biden’s administration has also deported immigrants, Trump’s anti-immigrant rhetoric is different. He has referred to immigrants as criminals, “rough people” and even animals. The incoming president has said he will use the U.S. military to carry out deportations.

“He built his whole campaign off vilifying Latinos and immigrants,” Iglesias said. “People feel ready. They know this is coming.” Iglesias said the previous Trump term, plus the pandemic, strengthened bonds in the community, which has found “different ways to feed and house” its members. 

He is also taking comfort in the fact that Oakland is a sanctuary city, and in the promises state officials have made, including Gov. Gavin Newsom and Attorney General Rob Bonta, to fight the Trump administration. Newsom has called a special session to ask the state Legislature to fund lawsuits against the incoming administration. Bonta told CalMatters in a recent interview that his office is preparing legal challenges to “a full frontal assault on our immigrant communities.” 

In San Francisco, Lemus’ organization has joined with other community groups to prepare for the deportations.

They are working on getting out information about what people can do to get ready and to inform them of their legal rights. “They don’t have to open their doors,” she said. “They can refuse to give out their information.”

She also said the fear is bound to be felt by others who could be mistaken for being undocumented: “I’m a dark Latina. What if I’m walking somewhere and don’t have my (ID)? What would happen to me?”

What business and industry are saying — or not saying

Business and labor representatives from some of the industries most likely to be affected refused interview requests from CalMatters, or had no comment. They include the California Restaurant Association, Napa Valley Vintners, the Wine Institute and the State Building and Construction Trades Council of California.

The California Chamber of Commerce emailed a statement from its president, Jennifer Barrera: “It is no secret that undocumented workers greatly contribute to California’s economy given our geographical proximity to the border, which is why CalChamber has been a long-time supporter of a national comprehensive effort that provides a pathway to citizenship or legal status for these individuals while at the same time addressing border security.”

A.J. Rossitto, advocacy director for the California Hotel and Lodging Association, said the group “does not anticipate a significant impact to hotel operations in California at this time.” 

That contradicts the view of Unite Here Local 11, a union that represents 32,000 hospitality workers in Southern California and Arizona who work in hotels, restaurants, universities, convention centers and airports.

“It’s really hard to hear that there would be no impact,” said Ada Briceño, co-president of the union. “It seems there’s a shortsightedness about not understanding who (the workers) are.”

She said the union is trying to figure out how to support those who would feel the impact of deportations, from its own members to their children and families. That includes educating the workers about what to do in case of workplace raids, or “making sure they’re able to assign legal guardians to their children.”

Many California small businesses could also be affected by deportations.

Iglesias, of Unity Council in Oakland, said “a lot of our merchants and business owners in Fruitvale, whether they’re immigrants with or without status, are worried about the impact on their businesses.”

Carolina Martinez, CEO of small business advocacy group CAMEO Network, said “entrepreneurs who are undocumented pay taxes and support the economy.” 

Latin American immigrants start businesses at double the rate of other Americans, she said, referring to a recent UCLA Luskin Public Policy analysis of U.S. Census data, which also found that immigrants started 36% of U.S. businesses last year.

Besides the deportation worries, Martinez is concerned about a possible drop in government funding that helps small businesses get up and running: “Business leaders and advocates need to speak up and support ongoing investments. Small businesses are a bipartisan issue.” 

California’s Central Valley will be left behind no more, its leaders and Gov. Gavin Newsom said today as the region became the first in the state to meet with the governor to submit its 20-year economic development plan, which aims to boost its agricultural industry and prepare for a key role in the green economy.

The event in Fresno builds on the governor’s initiative, which he introduced in March, to invest in economic and workforce development with a focus on 13 regions as the state tries to help create more opportunities outside of its traditional jobs centers, such as the Bay Area and Los Angeles. 

“A thriving Sierra San Joaquin region is essential to California’s future,” said Ashley Swearengin, chief executive of the Central Valley Community Foundation, which helped bring together the counties in the region to create the 502-page plan, which was funded by the state. She handed a binder with the plan to Newsom during the press conference.

Among other things, the counties of Madera, Fresno, Kings and Tulare are asking for $58 billion in public and private investments in the region over the next couple of decades, according to a draft of the plan from August. The region, which produces 25% of the nation’s food supply, has an annual output of $70 billion, the plan says.

Despite its agricultural contributions and the major role it’s expected to play in helping generate the state’s renewable energy, 1 in 5 people in the region live below the poverty line, said Swearengin, a former Fresno mayor. “The challenges that confront this region’s families must always be present in our minds.” 

The governor said he expects to take the other regions’ plans and release a statewide blueprint in January. The state has set aside $182 million so far in grants to follow through on the plans.

There’s optimism around the state’s focus on regions. Kate Gordon, CEO of California Forward, ​​a nonprofit organization that focuses on the California economy and a former director of the governor’s Office of Planning and Research under Newsom, said “across California, stakeholders are getting together on a thoughtful approach” to creating high-quality jobs. 

Gordon added that some people “don’t feel themselves as part of the economy right now,” and that the regions working on their own strategies was “an incredibly inclusive process.” 

Newsom acknowledged what he called economic uneasiness among the state’s residents despite fairly low unemployment.

“This is about people feeling on edge,” the governor said, adding that he is “excited” to support grant applications from the region. “It’s not talking about macro conditions, but about micro lived reality.”

A common takeaway from this year’s elections is that voters made their decisions partly because of their economic concerns, at least according to exit polls. 

Newsom, who is heading into his final two years as governor, says he’s responding to those concerns. Republicans continually criticize him for being out of touch with the daily struggles of many Californians. Even as his national stature has grown, the state’s voters are split on his performance as governor. 

The governor made today’s announcement in Fresno County, where 51% voted for Donald Trump and 46% voted for Vice President Kamala Harris, with all but 7,100 votes counted. In 2020, Trump lost the county to Democrat Joe Biden 53% to 45%.

Fresno County, which has a per-capita income of about $50,000 a year, among the lowest in California, has also consistently had among the highest unemployment claims in the state, according to data from the Employment Development Department. 

California’s unemployment rate inched up in October, to 5.4% from 5.3% the previous month. That’s the second-highest jobless rate in the nation, behind Nevada, while the U.S. unemployment rate is 4.1%. 

This week, the state’s nonpartisan Legislative Analyst’s office noted in its fiscal outlook for the next year: “Outside of government and health care, the state has added no jobs in a year and a half.”

California Gov. Gavin Newsom is preparing to wage a legal war against President-elect Donald Trump, convening a special legislative session next month to try to “Trump-proof” the state. But it appears Newsom and California legislators won’t initially include artificial intelligence safeguards in that fight, even though AI regulations were a major preoccupation of the Legislature this year.

Trump has promised to immediately rescind President Joe Biden’s executive order that had imposed voluntary AI guardrails on tech companies and federal agencies. The president-elect’s administration could also, immigrant advocates say, use AI tools to assist the mass deportation he has pledged to implement. 

While California adopted a number of AI regulations earlier this year, other issues are likely to take priority in Newsom’s special session, legislators told CalMatters.

There are signs, though, that AI could — in the not-so-distant future  — go from abstract concern to prominent political cudgel between the Trump administration and California’s Democratic leaders. It could be another high-profile way to challenge Trump and his newfound tech allies, some of whom have gleefully proclaimed a new, deregulated era for artificial intelligence products.

“I think Newsom and the California Legislature have an opportunity to step into the gap that the federal government is leaving — to create a model environment for safe and rights-respecting technology and deployment,” said Janet Haven, executive director of the Data & Society Research Institute, a nonprofit that studies the social implications of AI and other technologies. “On the other hand, there’s no way to get around the fact that Big Tech is right there, and will be a huge factor in whatever the California Legislature and Newsom want to advance in terms of AI legislation.”

Why California lawmakers and others worry about AI

AI safety advocates told CalMatters they’re not necessarily sweating the apocalyptic AI nightmares imagined by some doomsayers. Instead, they are focused on how AI tools are increasingly used in healthcare, housing, the labor force, law enforcement, immigration, the military, as well as other industries and fields prone to discrimination, surveillance, and civil rights violations — because there’s evidence that such tools can be unwieldy, inaccurate, and invasive. “We have documentation that shows how these AI systems are likely to do all sorts of things—they’re pattern-making systems, they’re not really decision-makers, but the private sector and the public sector are using them as a substitute for decision-makers,” said Samantha Gordon, chief program officer at TechEquity. “That’s not wise.”

Santa Ana Democratic Sen. Tom Umberg told CalMatters that 2024 “was a bit of a testing year” for AI bills. California lawmakers outlawed sexually explicit deepfakes and certain election-related deepfake content, required tech companies to provide free AI detection tools, and stipulated that tech companies must publicly release data about their AI training tools.

Gov. Newsom ultimately signed roughly 20 AI bills into law. But he also controversially vetoed a major bill by San Francisco Democratic Sen. Scott Wiener that would’ve instituted significant testing requirements on AI tools to make sure they avoid catastrophic outcomes such as major cybersecurity or infrastructure attacks, or the creation of weapons that could cause mass death. In his veto message, Newsom wrote that the bill risked curtailing innovation, but he added that he wanted to “find the appropriate path forward, including legislation and regulation.” 

Wiener told CalMatters he’s working on updated legislation that could garner “broader support.” Such a bill would presumably include additional buy-in from the tech sector, which the state is relying on for tax revenues, and which has a notable lobbying presence in Sacramento — Google just racked up the largest quarterly lobbying tab in a decade.

Asked whether to expect more Big Tech lobbying against regulatory efforts in California, Palo Alto Democratic Assemblymember Marc Berman said: “It’s going to be a good time to be a lobbyist. They’re going to do very well.”

Though Wiener’s AI testing bill was batted down, as were a few other noteworthy AI bills that didn’t make it out of the Legislature, California is “far and away the center of AI regulation in the U.S,” said Ashok Ayyar, a Stanford research fellow who co-wrote a comparative analysis of Wiener’s bill against the European Union’s more comprehensive AI efforts.

A lack of federal AI regulation and legislation

California is leading on AI in large part because the competition is basically non-existent.

Congress hasn’t passed meaningful AI legislation. Asked about Trump and the incoming Republican majority, San Ramon Democratic Assemblymember Rebecca Bauer-Kahan said, “There isn’t much regulation to deregulate, to be honest.”

Sans federal legislation, President Biden issued an executive order in October 2023 intended to place guardrails around the use of AI. The order built on five policy principles on the “design, use, and deployment of automated systems to protect the American public.” Biden directed federal agencies “to develop plans for how they would advance innovation in the government use of AI, but also protect against known harms and rights violations,” said Haven. Soon after Biden’s executive order, his administration created the U.S. AI Safety Institute, which is housed within the Commerce Department. 

Biden’s executive order relies on tech companies, many of which are based in California, to voluntarily embrace the administration’s suggestions; it also relies on agencies like the Department of Homeland Security, which includes Immigration and Customs Enforcement and Customs and Border Protection, to be transparent and honest about how they’re using AI technology and not violate people’s civil rights. 

Like most executive orders, Biden’s AI edict is loosely enforceable and fairly easy to reverse.

Trump has already promised to repeal Biden’s executive order on day one of his term; the 2024 Republican platform argues that the executive order “hinders AI Innovation, and imposes Radical Leftwing ideas on the development of this technology.” Homeland Security and other executive branch agencies may be granted far more flexibility when Trump takes office, though advocates say the bar was already low; a June 2024 report from the nonprofit Mijente titled “Automating Deportation” argues the department hasn’t followed through on the Biden administration’s already relatively meager requests.

After Trump clinched the 2024 presidential election, segments of the tech industry were jubilant about what they foresee for the AI industry—including an imminent uptick in government contracts. “Stick a fork in it, it’s over,” Marc Andreessen, the billionaire general partner of venture capital firm Andreessen Horowitz, wrote on X. “The US will be the preeminent AI superpower in the world after all.”

Fully unleashed federal agencies

If mass deportation of undocumented immigrants come to pass, as Trump has promised, that would require a wide variety of technologies, including AI tools. Homeland Security already employs an AI system called the Repository for Analytics in a Virtualized Environment, or RAVEn, a nine-figure government contract. The department also has access to an extensive biometric database, and monitors certain undocumented immigrants outside of detention centers via a surveillance tool that utilizes AI algorithms to try to determine whether an immigrant is likely to abscond. 

“We know from Trump’s first administration that there are going to be fewer guardrails with the use of this tech, and agents will feel even more emboldened,” said Sejal Zota, co-founder and legal director of Just Futures Law, a legal advocacy group focused on immigration, criminal justice and surveillance issues. “That’s one area where we’re going to see increased AI use to support this mass deportation agenda.”

To the best of Zota’s knowledge, there’s little California lawmakers or courts could do to prevent federal agencies from using AI tech against vulnerable populations, including undocumented immigrants. “Is it an issue? Absolutely, it’s an issue,” said Sen. Umberg. “What can we do about it? What can we do about federal agencies using artificial intelligence? We can’t do much.”

Estimates show there are at least 1.8 million undocumented immigrants in California.

Another potential threat to California’s AI regulations is if the majority Republican Congress passes looser AI rules of its own, preempting state law. California lawmakers, including Assemblymember Bauer-Kahan and Sen. Umberg, said they don’t think significant AI legislation will make it to President Trump for his signature. 

Congressional gridlock is one reason Sen. Wiener said he’s pursuing AI regulation in the California Legislature in the first place: “I was very clear that if (the issue) were being handled statutorily at the federal level, I’d be happy to close up shop and go home,” he said. “But it wasn’t happening, and it’s certainly not going to happen under Trump.”

Not everyone believes Congress will remain stagnant on this issue, however, particularly with one party now dominant in Washington. “I wouldn’t underestimate the creativity of this incoming administration,” said Paromita Shah, executive director of Just Futures Law.

Added Haven: “I think it’s possible that with a Republican trifecta, we’ll see an attempt to pass a very weak data privacy law at the federal level that preempts state law. Then it’s a game of whack-a-mole between the state legislature and the federal legislature.”

California’s next AI steps

Newsom has to date signed many AI bills but turned back others he says go too far and risk inhibiting  an industry he has sought to cultivate as a government partner. A spokesperson for Newsom did not directly respond to CalMatters’ questions for this story, instead providing a statement highlighting the state’s role in shaping the future of so-called “generative AI,” a recent and innovative form of the technology behind tools like ChatGPT, DALL-E, and Midjourney: “California has led the nation in protecting against the harms of GenAI while leveraging its potential benefits,” said spokesperson Alex Stack. 

President-elect Trump’s team did not respond to written questions from CalMatters.

Dan Schnur, a political analyst and professor at UC Berkeley and other campuses, predicted the governor will save his political capital for other clashes. “Newsom’s incentive for strengthening his relationship with Silicon Valley is probably stronger than his need for yet one more issue to fight over with Donald Trump,” Schnur said.

Florence G’Sell, a visiting professor at Stanford’s cyber policy center, cautioned Newsom against clinging to the deregulatory side of Silicon Valley. “There is really a very strong movement that wants to highlight the risks of AI, the safety questions,” G’Sell said. “If I were the governor, I wouldn’t be insensitive to this movement and the warnings.” 

Lawmakers are eyeing other avenues to shore up Californians’ redresses against AI technology. Assemblymember Bauer-Kahan previously told CalMatters she plans to reintroduce a stronger version of a bill, which failed to advance past the Legislature last session, to crack down on discriminatory AI practices. Another top AI priority, according to Menlo Park Democratic Sen. Josh Becker, is less sexy, but perhaps just as important: “closely monitor the implementation of this year’s regulatory framework (that we just passed),” he wrote. 

California’s next AI regulatory steps were always going to be intensely analyzed. That’s even more so the case now, with Trump returning to office—a challenge state lawmakers are embracing.

“One of the things that is somewhat amusing to me is when folks come to me and say, ‘Whatever you do in California is going to set the standard for the country,’ Sen. Umberg said. “As a policymaker, that’s catnip. That’s why I ran for office.”

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A range of experts, from Nobel Prize-winning economists to an internet-famous menswear writer, have a message for Americans who voted for Donald Trump based on his promises to bring down prices: This likely won’t go how you want. 

Some voters cited the cost of living as a factor in their decision to elect Trump to a second term as president. But with inflation actually starting to ease, his proposed tariffs, which the president-elect has called the “most beautiful word in the dictionary,” could actually raise prices again.

While some experts don’t think more tariffs are a bad idea, the majority of economists and other experts who spoke with CalMatters echoed 23 Nobel laureates who warned that Trump’s policies would be worse for the economy than the ones proposed by Vice President Kamala Harris. Those economists wrote a letter last month calling Harris’ economic agenda “vastly superior” to Trump’s, and mentioned tariffs as one reason.

“His policies, including high tariffs even on goods from our friends and allies and regressive tax cuts for corporations and individuals, will lead to higher prices, larger deficits, and greater inequality,” the economists wrote.

Businesses that import goods into the country must pay the tariffs. They tend to pass on their increased costs to consumers, with some executives recently promising to do just that during their earnings calls. So economists largely view tariffs as a tax, especially on the lowest- and middle-income families in the nation. 

While tariffs could raise prices for all U.S. consumers, California could feel the brunt of the impact in part because of the countries Trump singled out during his campaign: China and Mexico. Those two countries accounted for 40% of the state’s imports in 2023.

“The port and logistics complex in Southern California is a very important part of the economy, and directly tied to the countries he threatened,” said Stephen Levy, an economist and director of the Center for Continuing Study of the California Economy, an independent, private research organization in Silicon Valley. 

Trump imposed tariffs during his first presidential term, and President Joe Biden maintained some of them. During his campaign this time around, Trump said he intends to impose tariffs of 10% to 20% on all imports, and has mentioned even higher tariffs on goods from China (60%) and Mexico (100% to 200% on cars). 

Such tariffs could exacerbate California’s already high cost of living and raise the prices of cars, technology and electronic products, medical devices, groceries and more. Also, as the state saw during Trump’s first term — which included a trade war, with countries retaliating with their own tariffs on U.S. exports — California’s agricultural industry is likely to feel the effects. Trump’s proposed tariffs could also have an adverse effect on the state’s ports, which are among the nation’s busiest. 

And all of those outcomes could have a ripple effect on jobs in the state, including those in agriculture, trade and manufacturing.

What the state’s ports expect

Trade experts say it’s too early to tell how the state’s ports could be affected, though some of them also said they expect a near-term surge in activity as businesses brace themselves for tariffs by importing more goods now. 

“Long Beach and Los Angeles are two of the largest ports in the U.S.,” said Jonathan Aronson, a professor of communication and international relations at the University of Southern California, who studies trade and the international political economy. “Their traffic would presumably slow in both directions” if Trump imposes tariffs, Aronson said. Like other experts, though, he wondered if the president-elect is using the threat of tariffs as a negotiating tactic — say, to pressure Mexico into doing more to limit immigration into the United States. 

The most recent available data for the Port of Los Angeles, which is the busiest in North America and handles nearly 10% of all U.S. imports, shows that trade activity rose nearly 19% at the port in September from the same month a year ago. September imports totaled $27.9 billion, a 20% increase year over year. There’s a chance those numbers could head the opposite direction as a result of tariffs.

“Significant increases in tariffs, and the possibility of retaliatory tariffs, could have a significant impact on traffic — and jobs — at the port,” said Phillip Sanfield, a spokesperson. “We’re monitoring developments closely.”

The Port of Los Angeles says nearly 1 million California jobs are related to trade at that port.

The Port of Long Beach handles about 3% of all U.S. imports and has about 575,000 Southern California jobs tied to trade. Chief Executive Mario Cordero said, through a spokesperson, that he is waiting to see what trade policies Trump actually will adopt: “At this point we expect that strong consumer demand will continue to drive cargo shipments upward in the near term.” 

The Port of Oakland, whose trade-related jobs at both the airport and seaport number about 98,000, also expects a traffic boost at first. Spokesperson Robert Bernardo: “As a West Coast seaport, our primary trading partner is Asia, and what’s happening right now is that retailers are expecting a short-term shipping surge in advance of new tariffs.” 

Mike Jacob is the president of the Pacific Merchant Shipping Association, a not-for-profit maritime trade association whose members facilitate trade. They include ocean carriers, marine terminal operators and more. 

Jacob, too, said he is expecting trade activity to pick up ahead of whatever tariffs Trump imposes: “Given the lack of understanding of the timing, scope and scale (of the tariffs), you’re more likely than not to move cargo earlier.”

As a result of tariffs during Trump’s first term, Jacob said there was “a small bump in cargo back in 2019 that resulted in additional impacts on our logistics chain.” He said after that experience, which was then followed by pandemic-related chaos, the industry might be a little more prepared to deal with possible supply-chain disruptions.

Possible effects on manufacturing

The San Diego Regional Chamber of Commerce is worried about potential tariffs on goods from Mexico. Kenia Zamarripa, a spokesperson for the group, said the CaliBaja region — which includes San Diego and Imperial counties and the Mexican state of Baja California — is interconnected, with a multibillion-dollar supply chain. The region’s logistics facilitate 80% of the trade between California and Mexico, she said.

The nation’s top imports from Mexico in September — worth at least $2 billion for each category — were petroleum and coal products, computer equipment and motor vehicle parts, according to the most recent statistics from the U.S. Census Bureau’s Bureau of Economic Analysis.

Some specific products that are imported into the U.S. from Mexico through California include the Toyota Tacoma. The truck and its components are made in Baja California and elsewhere in Mexico. “Imagine taxing each component before it goes to Mexico and back,” Zamarripa said. 

She added that the region also leads in producing medical devices, and that the importance of that became apparent during the beginning of the pandemic when “a bunch of companies shut down, not knowing that a little metal piece they were producing was a vital part of a heart monitor, for example.”

Mexico’s economy minister, Marcelo Ebrard, said this week that he would hit the U.S. with tariffs if Trump imposes tariffs, though President Claudia Sheinbaum has seemed more open to negotiations.  

Lance Hastings, chief executive of the California Manufacturers & Technology Association, said he’s well aware of the disruption tariffs can cause. When Trump put tariffs on aluminum and steel imports, aluminum prices rose at least 25%, Hastings said. “I was in the beer industry when it was put in, and we felt it,” he added.

Hastings also said the anxiety around Trump’s proposed tariffs stem in part from the fact that “we’re still trying to get the supply chain back to normal” after the pandemic. Because “California is the gateway to Asia, the state would feel the impact of more tariffs first and more than everybody else,” he said.

Made in the USA

Yet there is a bit of optimism among those who think some tariffs could actually help California manufacturers. 

Sanjiv Malhotra, founder and CEO of Sparkz, a maker of lithium batteries, said tariffs could benefit his company and the rest of the domestic battery industry amid the increasing popularity of electric vehicles. 

Sparkz, which will get its materials from West Virginia and make batteries at a plant in Sacramento, “is all U.S.-sourced. Nothing is coming in from China,” Malhotra said.

During his campaign, Trump indicated he would try to roll back emission-reduction rules and said he would oppose banning gas-powered vehicles. But Malhotra, who served in the U.S. Energy Department under the first Trump administration, said that as demand for lithium batteries grows, he believes Trump’s incoming administration will understand that they “need to be made here in the U.S. so we are not dependent on China for batteries.”

Kate Gordon, CEO of California Forward, a nonprofit organization that focuses on the state’s economy, said that while it’s important to get back some of “what we’ve lost over the past couple of decades” — the nation once led in solar panels — it “needs to happen deliberately and with attention to where we’re really competitive.”

“What would be terrible would be tariffs on things where we’re no longer competitive, like parts of the solar supply chain, which have been held by China for a long time,” she said. All that would do is drive up prices, Gordon said.

Americans may say they want things to be made in the USA, but they also don’t want to pay higher prices for them, said Derek Guy, a menswear writer based in San Francisco who has covered the clothing industry for more than a decade. A few years ago, Guy wrote about American Apparel, under new ownership, offering U.S. consumers the option of paying a little bit more for clothing made here vs. similar pieces made overseas. 

“Even based on a few dollars, when someone wasn’t looking over (their) shoulder, people chose the foreign version,” Guy said. 

“A lot of manufacturing in the U.S. has long shifted toward the higher-end,” Guy said. “The kind of cheaper clothes we’re talking about (what most Americans buy) are made elsewhere.” Tariffs would raise those prices.

The price of almonds

California’s top agricultural exports include almonds, wine, dairy products, pistachios and other nuts.

During Trump’s first term as China imposed retaliatory tariffs on the U.S., California exports of wine, walnuts, oranges and table grapes to China fell, according to the University of California Giannini Foundation of Agricultural Economics.

In addition, almond prices sank, with the foundation’s researchers saying prices fell from $2.50 a pound to $1.40 a pound in 2018. That had a negative impact on an industry that generates $4 billion to $5 billion a year and employs about 110,000 people, according to the website of lobbying group Almond Alliance. 

Amanda Russell, a spokesperson for the Almond Alliance, said in an emailed statement: “In previous trade negotiations, President Trump demonstrated a commitment to supporting agriculture, and we are optimistic about continuing this partnership to address the challenges and opportunities facing our growers and stakeholders.”

Besides tariffs, another likely action by Trump that could affect the state’s agriculture industry is mass deportations — a threat that has immigrants and advocates on edge. 

“I can’t see any benefit to California if he goes through with mass deportation,” said Levy, the economist in Silicon Valley. “Even the threat of deportation will affect the labor pool.”

LAUSD, the nation’s second-largest school district, has approved a ban on phones in classrooms starting January 2025. This decision aligns with a broader trend across California, as lawmakers and schools push for similar restrictions. Governor Gavin Newsom encourages districts to act now, citing the 2019 law empowering them to enforce bans. Read the full story.

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A bill attempting to remedy California’s ongoing gas price spikes has prevailed despite questions about whether it could jeopardize worker safety.

The bill – Assembly Bill X2-1 – would require refineries to keep a to-be-determined minimum amount of gas supply on hand to help smooth out price spikes the state said happen when refineries go down for routine maintenance. The measure cleared the state Assembly earlier this month and the state Senate last week. Today it received final approval in the Assembly and was signed into law by Gov. Gavin Newsom, who had convened a special session to get the measure passed.

Those representing unionized workers in refineries argue that the legislation would jeopardize worker safety, and if storage requirements are untenable for refiners, closures and large job loss could follow.  At issue is a provision in the bill that would give the California Energy Commission the ability to approve scheduled maintenance for refiners. State officials said this is meant to push refiners to be proactive in their maintenance planning, which, paired with higher reserves of gas supply on hand, would tamp down price spikes for Golden State drivers. 

The state and the bill’s authors said current laws governing worker safety are not affected by the bill.

“Let me be clear, ABX2-1 does not prohibit a refinery from conducting important maintenance. Refiners can and should perform the maintenance they need to to keep their workers and facilities safe,” Assemblymember Gregg Hart, a Santa Barbara Democrat and one of the bill’s authors, said at an Oct. 7 state Senate hearing. 

The bill’s final version requires protecting the safety and health of “employees, local communities, and the public” in the process.

The State Building and Construction Trades Council represents many unionized workers  employed in refineries. Jeremy Smith, chief of staff for the group, expressed concern that this plan could come at the expense of worker safety. If the state denies a refinery’s planned maintenance, he said, it could lead to “catastrophic breakdowns.”

“Maintenance must be done on a schedule based only on the condition of metals and infrastructure and the lifecycle of equipment such as vessels, pipes and valves,” he said at the hearing.

A worst-case scenario could be an explosion at a refinery, trades council president Chris Hannan told CalMatters. An explosion  in 2015 at a Torrance refinery owned by ExxonMobil injured two workers and led to higher gas prices. 

State energy commission vice chair Siva Gunda, a Newsom appointee, pushed back on such concerns. Not all refineries plan for maintenance the same way, he said, resulting in some having adequate supply for the market while others don’t “because there is no incentive” to keep a higher level of supply. The energy commission identified a 15-day supply of gas as a key point at which gas prices begin to shift. 

The finer details of how the state’s plan would work are to be determined through a rulemaking process if the bill is passed. Gunda said the state would examine refiners’ current maintenance protocols during that process to understand if they are working.

“If existing protocols currently work, we will not touch them,” he said.

The state also pointed out that the legislation does not supersede other labor laws, such as Occupational Safety and Health Administration requirements.

Prior legislation gave the state access to refiners’ data it is currently using to support its argument that the state’s price spikes are driven primarily by short supply during refinery maintenance. State Sen. Steven Bradford, an Inglewood Democrat and chairperson of the Senate special session committee, said he was “encouraged” by provisions in that earlier legislation that require meeting annually with labor representatives through an advisory committee, but noted that the six-person committee has yet to convene because Newsom’s administration hasn’t appointed its members yet. 

Bradford previously carried legislation, unsuccessfully, that would have required the state to consult with labor groups about the impact on refinery employees and the communities around the refineries.

“I continue to raise those same concerns that the decisions regarding scheduling of refinery and maintenance should not be left up to bureaucrats, but should be in the hands of the men and women who do this work on a daily basis of operating these complex facilities,” he said at the hearing.

The bill has drawn strong criticism from groups representing the petroleum industry over whether new storage would need to be built to meet the bill’s requirements. The industry said the measure will lead to higher prices. It has also argued that it will need to build more costly storage, but amendments in the Assembly stipulate that the reserve requirements, to be determined by a special committee, cannot be larger than fits in existing tankage.

Chevron, which recently announced it is moving its headquarters to Texas, took the unusual step this week of submitting a letter to the chair of the Assembly Committee on Petroleum and Gasoline Supply contesting what it called “frankly ridiculous claims” of price gouging driving price spikes.

“We will do our part to ensure California consumers are informed about your role in shaping policies making life even more unaffordable,” the company said in the letter.

Despite defections from several members of the Democratic majority, the state Senate today advanced Gov. Gavin Newsom’s proposal to address gasoline price spikes, placing it on the brink of becoming law.

The Senate passed Assembly Bill X2-1 — which would require oil refineries to maintain additional inventory that they can draw from during maintenance periods to sustain a steady supply for drivers — on a 23-9 vote. Final approval, sending the measure to Newsom for his signature, is expected Monday in the Assembly, which passed a previous version last week.

The vote was not guaranteed. Newsom first pushed the Legislature to consider his proposal before the end of the regular legislative session in August, but the Assembly balked and the governor ordered a special session. Senate President Pro Tem Mike McGuire, a Healdsburg Democrat, initially refused to call his members back to Sacramento, then softened under pressure from Newsom.

The governor celebrated in a statement today that “Californians are one step closer to getting the protections they need against Big Oil’s price spikes.”

But between absences, abstentions and opposition, eight Senate Democrats — more than a quarter of the caucus — did not vote for his bill, hinting at a lingering uneasiness even among Newsom’s allies. The oil industry and Republicans have been sharply critical of the proposal, which they argue would actually drive up prices at the pump by artificially limiting supply as refiners build up reserves.

Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, in a statement criticized the governor for “pushing an extremist agenda that isn’t about lowering gas prices — it’s about intentionally raising them so Californians drive less.”

One Democrat, Sen. Melissa Hurtado of Bakersfield, joined Republicans in voting against the measure, while another, Sen. Richard Roth of Riverside, abstained. Though some of the six absent members might have supported the bill, several are in competitive elections this fall and appeared to be trying to avoid taking a position that could be used against by opponents.

Shortly before the floor session, Sen. Dave Min, an Irvine Democrat who is running for a swing congressional seat, released a statement announcing that he would not participate in the vote.

“We should be looking to investigate and address why California gas prices are higher than they should be, including the mystery surcharge that penalizes our drivers,” Min said. “However, opponents of ABX2-1 have raised serious concerns about whether the specific policy proposals in this bill will accomplish those goals and also whether this legislation may have counterproductive impacts.”

McGuire dismissed the notion that Democrats might be nervous about supporting the inventory mandate for refineries.

“Lowering gas prices is never bad policy,” McGuire told reporters. “That’s what this bill will do.”

Some prominent experts agree that the approach could dampen the gas price spikes that California regularly experiences during seasonal refinery maintenance. The state estimates that drivers could save as much as $2 billion annually.

But labor unions representing refinery workers, a key political ally for Democrats, have also lobbied heavily against it because they fear state regulations would prioritize economic considerations over their safety and could establish requirements that refineries are unable to meet, forcing them to shut down and eliminating jobs.

As the Senate met this morning, labor representatives sat alongside lobbyists for the oil industry in the back of the chamber, observing the proceedings.

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In some corners of the Inland Empire, the region’s agricultural legacy collides with its urban and industrial development. One of those places is Riverside County’s First District, represented by Supervisor Kevin Jeffries.

The district includes more than half a million people living in the cities of Riverside and Perris or in several unincorporated communities, such as Good Hope, Mead Valley and Highgrove. 

Family incomes in the district range widely. The community with the lowest annual household median income is Good Hope at $43,722, and the highest is Highgrove at $80,897, according to a 2022 district profile. 

About 7 in 10 residents are Latino in Good Hope, Jurupa Valley, Mead Valley and Perris, and White people make up more than half the population in Highgrove, March Air Reserve Base and Riverside. There are concentrations of Asian residents and Native Hawaiians (12%) in Highgrove and March ARB and Black residents in Perris (8%).  

Jeffries, who previously served in the state Assembly, is in his final term on the Riverside County Board of Supervisors. He discussed the diverse geography and character of the First District. 

How do the communities in your district differ?

Riverside city is very self-sufficient and compact in the sense that they have strong city council leadership, strong mayoral leadership, and they’re very actively engaged in regional political efforts and lobbying efforts. They’re doing very well looking out for their constituents, to improve the long-term viability of the city.  It allows me to focus on our disadvantaged communities. Some of them are areas that time forgot, that infrastructure services didn’t come into. 

What are the challenges for unincorporated communities such as Mead Valley and Good Hope?

They are truly the last vestiges of rural communities in the western half of the county. The population has exploded in those communities, so now we have over 20,000 people, which is actually bigger than some of our small cities in this county. And they don’t have the services, they don’t have the amenities, they don’t have the infrastructure. So we’ve been walking this fine line between trying to maintain the rural atmosphere while delivering some modern infrastructure, like street lights, paved streets, water lines and sidewalks— just bare essentials necessary to make the communities a little safer for the kids to walk to and from school and make the roadways a little safer.

What are some objections to modernizing those areas?

The residents who moved there a long time ago love their rural lifestyle, love their horseback riding, love the trails. They’re holding onto that lifestyle, and rightly so in many ways. We don’t want to overturn that rural lifestyle. But, at the same time, we have to make it safer as the population continues to grow. So that gets back to the competition between sidewalks and trails, the competition of having dark streets and having well lit streets. We want to improve the quality of life while protecting the rural atmosphere, so it’s a delicate balance.

This story was made possible in part by a grant from the CIELO Fund of the Inland Empire Community Foundation.

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When oil giant Chevron said over the summer that it would be moving its corporate headquarters to Houston from San Ramon, the headlines were dire. “Chevron Dumps California for Texas After 145 Years,” read one. Another called the move a “Snub to California.” A third noted that the departure came “as Regulations Mount in Golden State.”

The gloomy headlines illustrate how the press and corporate leaders often oversimplify big-company departures from California, leading citizens and state officials to under-examine the factors that lessen the impact of corporate departures and overstate their importance. The same type of doomsaying has played out with other big companies whose headquarters are leaving or have left the state, including Tesla, Oracle and SpaceX. 

In Chevron’s case, discussions of the exit tended to miss or downplay a few key points. Despite talk tying the move to regulations and climate-change litigation in California, CEO Mike Wirth said repeatedly that the relocation was about moving to “the energy capital of the world,” not policy differences with state officials. Also, Chevron already had three times as many workers in Texas as in California at the time it decided to move. And few observers bothered to note the major operations Chevron would retain in the state, including refineries and oil fields.

With other exits, pundits often don’t examine the true effects on state tax revenue. Or take into account the fact that some companies leave key people in California or eventually return. And expansions by companies or startups that pop up here don’t get as much attention, either, the governor and some economists say.

“This is a long narrative in California — about businesses moving out,” said Ted Egan, chief economist for San Francisco. “At the same time, you need to talk about businesses starting up.” 

Understanding the nuances of corporate exits is important because the departures can influence state policy and affect confidence among consumers and businesses. For example, the prospect of tech companies fleeing the state was raised this year by opponents of a California bill, eventually vetoed by the governor, that would have made tech companies test for critical harms from large artificial intelligence systems. Similarly, when Democratic Assemblymember Alex Lee of San Jose proposed a wealth tax last year, the California Chamber of Commerce said in a letter to him that the tax would likely contribute to “California’s business and resident exodus.” It did not pass. The Chamber used identical language in 2022 when successfully opposing various tax increases to fund a single-payer state health care program.

Despite complaints about high taxes, expensive housing and burdensome regulations — grousing that has been going on for decades — the state remains the national leader both for tech startups and for its share of big companies.

“I agree California is a more onerous place to do business,” said David Neumark, a UC Irvine economics professor who has studied relocations. “But it’s not like we’re some basket case.”

When leaving looks like staying

Some companies that recently made high-profile headquarters exits from the state have also either added more California employees or kept the lion’s share of workers here. Any remaining employees in California will continue to pay the state’s personal income tax.

Take Oracle, for example. The tech company announced in 2020 that it was moving its headquarters to Austin from Redwood City, leading to headlines like “Oracle Moves Headquarters to Texas, Joining Valley Exodus” and worries over “California’s higher operational costs and hefty taxes,” not to mention “steeper cost of living,” according to a couple of articles about the news. And yet Oracle as of this past spring still had almost triple the office workers in California than it has in Texas, 6,900 vs. 2,500, Bloomberg reported. A company spokesperson did not return a request for comment. But Redwood City’s data showed the company was still its biggest employer as of 2023. Though Oracle eliminated about 3,000 jobs in Redwood City over the past decade, it retains about 3,757 workers there, or more than 7% of the city’s workforce. 

Oracle continues to pay taxes in California, though because tax records are confidential, it’s hard to know exactly how much. That includes not just sales taxes but corporate income taxes too; moving a headquarters does not necessarily mean a company escapes those.  

“Corporations’ tax has very little to do with where their headquarters or employees are located,” said Brian Uhler, deputy legislative analyst with the state. “For a multinational business, they earn profit in California and outside California. California attributes profits to the state based on what share of a company’s national sales occur here.”

The state taxes corporations based on their sales, property and investments. So if a company earns revenue from sales or transactions in California, the company will pay taxes here regardless of where its headquarters is based. Companies also have to pay employment taxes for their workers based here. And certain types of companies, such as banks and other financial institutions, pay higher or additional taxes.

Another tech company that continues to contribute tax revenue to the state: Hewlett-Packard Enterprise, which announced it was relocating its headquarters to Texas in 2020. Even so, company spokesperson Adam Bauer said last month that the company has about 3,700 employees in Texas and about 3,600 in California. And on the company’s website, there were recently more job openings in California (45) than in Texas (34), including a few sales positions, a Northwest account executive and a “supplier relationship owner” for Nvidia, which is based in California. 

A third company that “left” California without really leaving is Tesla, which has actually grown in the state since its departure. The electric car maker moved its headquarters from Silicon Valley to Austin in 2021. CEO Elon Musk told shareholders that the company’s factory in Fremont was “jammed” and that housing costs in the state were high, making it tough for workers to live near the facility. Musk had also clashed with local health officials about COVID-related shutdowns. The New York Times framed the relocation as a “Blow to California.”

But three years later it doesn’t seem like a particularly severe blow. In 2022, the year after the move, the company “grew to 47,000 employees” in California, it said in a blog post, and ”our production footprint continued to increase.” Then, the next year, Tesla announced it would put its engineering and AI headquarters in Palo Alto, reportedly expecting to locate 1,400 employees in Hewlett-Packard’s former headquarters there. 

California’s Tesla experience makes it hard not to wonder how impactful two other recently announced Musk-related relocations will be. In July, the billionaire said he was moving the headquarters of social media company X and rocket builder SpaceX to Texas from California. Musk cited a law recently signed by Gov. Gavin Newsom that bans the state’s school districts from requiring parents to be notified of a change in their child’s gender identification. Musk has a transgender daughter and has been publicly critical of transgender people’s rights to choose preferred pronouns. He called the law “the final straw” on top of  “many others that preceded it, attacking both families and companies.” 

It’s not clear how many California X and SpaceX employees will actually end up in Texas. A source told the Washington Post that the 120 employees at X headquarters in San Francisco will move to Musk-linked offices in San Jose and Palo Alto, but since then the company has reportedly said in legal filings that it will move X’s headquarters to Bastrop, Texas. LAist quoted experts saying that moving SpaceX to Starbase, Texas, will be complicated and time-consuming since the company’s headquarters in Hawthorne is a huge aerospace facility. X and SpaceX did not respond to requests for additional information.

Similarly, Chevron spokesperson Randy Stuart said the company has not yet decided which of its positions in San Ramon will relocate to Texas. The relocation is not effective until Jan. 1 and the company expects it will take five years to migrate most corporate functions to Texas. Some 2,000 Chevron employees work in California versus 7,000 in Texas but that includes people outside of headquarters working on Chevron’s operations in this state, including crude oil fields, technical facilities and two refineries, which range from the San Joaquin Valley to Richmond to El Segundo. 

Growth can be hard to notice

While big departures like Musk’s get a lot of attention, expansions and new businesses within California tend not to.

In a recent Instagram post, Newsom tried to combat what he labeled “misinformation” about California’s economy by touting in-state expansions by well-known companies such as Visa, Ford Motor, Nintendo and Disneyland. He added that “the world’s leading AI companies are expanding right here in California.”

The governor may have a point about those expansions. There weren’t very many headlines — if any — about Visa recently opening a big new office in San Francisco; Ford’s plans to roll out a new electric-vehicle development center in Long Beach early next year; Nintendo’s intention to open a store in San Francisco next year; and Disneyland’s multibillion-dollar expansion over the next decade that promises jobs and community benefits for the city of Anaheim. 

Statewide, about 291,000 new business entities have registered in California this year, according to the secretary of state’s office, compared with 215,000 a decade ago. And that number does not include sole proprietorships, which do not register with the state.

Egan, San Francisco’s chief economist, noted that new AI companies are taking office space in San Francisco, helping the city’s slow recovery from the pandemic-induced boom in remote work. PitchBook, which keeps track of capital markets, recently ranked San Francisco the top city in the world for startups. New York and Beijing were second and third. And a report from PitchBook and the National Venture Capital Association showed that the Bay Area and Los Angeles combined had a total of 746 venture capital deals in the fourth quarter of 2023, compared with 402 deals in New York, the runner-up.

In addition, for the first time since 2014, California as of June has the highest number of Fortune 500 companies, 57, while Texas and New York have 52 each. Newcomers to Fortune magazine’s annual ranking of the world’s biggest companies based on their revenue included California-based companies DoorDash, Workday, Prologis and Clorox. 

Sarah Bohn, labor economist at the Public Policy Institute of California, said the headquarters moves “warrant attention, at a minimum. These moves make headlines, and that’s an important force for how people are feeling about doing business in California.”

Bohn said she is currently doing research to quantify the effects of corporate departures, but that it’s important to remember that there are always businesses moving out of, starting up in, or dying in the state. 

Neumark, the UC Irvine professor, is working with Bohn on that research. He also co-authored a couple of research papers that examined the issue in 2004 and 2007, so he knows the concern about businesses leaving the state is not new. Neumark saw the same worries back then, during the Arnold Schwarzenegger era. There was a lot of talk about companies moving out of California and some “crazy political stuff,” he said. That included the actor-turned-governor showing up at a Las Vegas business with a van marked “Arnold’s Moving Co.” to symbolically help that company move back to California.

Neumark and his fellow researchers found in 2007 that California did not lose a significant number of workers due to business relocations, only about 11,000 jobs a year out of more than 18 million jobs from 1992 to 2004. In the same period, total employment in the state rose by around 106,000 jobs per year, driven by the creation and expansion of new businesses, according to data presented in the paper. The researchers found no evidence of a mass business exodus, saying that the net losses in the number of businesses that left and jobs lost as a result were negligible: 0.05% of businesses in California moved to other states during each of the two worst years, 1993 and 1994; and 0.1% of jobs were lost to relocation during each of the two worst years, 1997 and 1998. He mentioned that a substantial portion of California’s economy is service-oriented, “and restaurants and hospitals don’t move to other states.” 

Complaints from departing corporations

There is no denying that some business executives are fed up with the state. 

After Chevron’s exit last month, the president of moderate business group Bay Area Council, Jim Wunderman, said in a written statement: “It’s an embarrassment for California that we’ve lost so many global companies because of misguided policies that make it incredibly difficult to do business here.”

In an interview with CalMatters, Wunderman said it’s time for a “reckoning.” He said lawmakers and officials need to rethink policies that make it hard to build housing, or drive up the cost of energy. “I understand we’re going through an energy transition. Do we have to do it in a way that we exacerbate economic problems in the state?”

He pointed to a bill, recently signed into law by the governor, that aims to curtail traffic and air pollution from warehouses. “We’re constantly regulating things to make it more difficult for businesses. (The warehouse bill) particularly affects the Inland Empire, whose economy is built around that industry.” By possibly reducing the number of job opportunities at warehouses, Winderman said the new law could hurt the very people it’s trying to protect.

California’s flat corporate income tax rate of 8.84% of a company’s net income is the sixth highest in the country, according to the right-leaning think tank Tax Foundation. Conservative legislators also criticized a recent decision by the governor and Legislature to suspend certain business tax deductions and limit tax credits for three years to close the budget deficit, saying such suspensions have become too common. 

On the other hand, the state’s corporate tax rate has actually declined over the past few decades, with state lawmakers slashing it from 9.6% to 9.3% in 1987, then to its current rate in 1997. The California Budget & Policy Center, a left-leaning think tank, said in a 2022 analysis of state data that corporate tax breaks have lessened the tax burden on California businesses over the years.

Ahmad Thomas, CEO of Silicon Valley Leadership Group, which advocates for big tech companies, said, “The challenge we have is the cost of doing business and operating in California continues to increase. How do we mitigate that?”

Thomas said California’s “competitive advantage continues to be chipped away at year after year by competition” that is global. He mentioned that there needs to be “more innovative solutions… around our cost structure connected to our tax policy,” as well as more affordable housing. 

He wants industry and policymakers to work together to drive down the cost of living here, while trying to minimize additional taxes to businesses.

Still, business leaders get something in exchange for grappling with those challenges: access to capital, a skilled workforce, world-class universities and more.

“Full stop, I believe there is no better place to locate, grow and scale a company than in California,” Thomas said. 

And not all state policies and laws drive business away. They help create them.

Bohn of the Public Policy Institute of California said the state continues to have policy levers, such as tax credits, that it can use to target businesses it wants to keep in the state.

Case in point: Newsom boasted last year during a press conference with Musk about Tesla’s partial homecoming that California legislation and policies on clean vehicles helped spur the company’s rise to electric-vehicle dominance. It is the most valuable automaker in the world and responsible for the bulk of Musk’s wealth, which reportedly will soon stretch beyond $1 trillion. Tesla’s success wouldn’t have happened without California, where the company has received at least $3.2 billion in direct and indirect subsidies from the state, with the bulk of those being tax credits for zero-emissions vehicles, according to estimates from Newsom’s office reported by the San Francisco Chronicle. 

At the press conference, Musk stood stiffly by as Newsom bragged about the state’s pivotal role. But then the billionaire also made an admission that might startle those who think California businesses are beset by red tape and entitled workers: Tesla’s Fremont factory is the most productive automotive plant in North America. 

“It will probably be about 600,000 or more cars this year,” Musk said. “California is a tremendous manufacturer as well as a place of engineering innovation.”

That’s a point, Newsom added, “which is, again, often so lost.”

After the attempted assassination of Donald Trump in July, the merchandise started showing up on Facebook.

Trump, fist in the air, face bloodied from a bullet, appeared on everything. Coffee mugs. Hawaiian shirts. Trading cards. Commemorative coins. Heart ornaments. Ads for these products used images captured at the scene by Doug Mills for the New York Times and Evan Vucci for the Associated Press, showing Trump yelling “fight” after the shooting. The Trump campaign itself even offered some gear commemorating his survival.

As the Secret Service drew scrutiny and law enforcement searched for a motive, online advertisers saw a business opportunity in the moment, pumping out Facebook ads to supporters hungry for merch.

In the 10 weeks after the shooting, advertisers paid Meta between $593,000 and $813,000 for political ads that explicitly mentioned the assassination attempt, according to The Markup’s analysis. (Meta provides only estimates of spending and reach for ads in its database.) 

Even Facebook itself has acknowledged that polarizing content and misinformation on its platform has incited real-life violence. An analysis by CalMatters and The Markup found that the reverse is also true: real-world violence can sometimes open new revenue opportunities for Meta.

While the spending on assassination ads represents a sliver of Meta’s $100 billion-plus ad revenue, the company also builds its bottom line when tragedies like war and mass shootings occur, in the United States and beyond. After the October 7th attack on Israel last year and the country’s response in Gaza, Meta saw a major increase in dollars spent related to the conflict, according to our review.

Tech advocacy groups and others question whether Facebook should even profit from violence and whether its ability to do so violates the company’s own principles of not calling for violence. The company said advertisers often respond to current events and that ads that run on its platform are reviewed and must meet the company’s standards.

If you count all of the political ads mentioning Israel since the attack through the last week of September, organizations and individuals paid Meta between $14.8 and $22.1 million dollars for ads seen between 1.5 billion and 1.7 billion times on Meta’s platforms. Meta made much less for ads mentioning Israel during the same period the year before: between $2.4 and $4 million dollars for ads that were seen between 373 million and 445 million times.  At the high end of Meta’s estimates, this was a 450 percent increase in Israel-related ad dollars for the company. (In our analysis, we converted foreign currency purchases to current U.S. dollars.)

The American Israel Public Affairs Committee, a lobbying group that promotes Israel, was the major spender on ads mentioning Israel. In the six months after October 7th, its spending increased more than 300 percent over the previous six months, to between $1.8 and $2.7 million dollars, as the organization peppered Facebook and Instagram with ads defending Israel’s actions in Gaza and pressuring politicians to support the country. 

As the war has roiled the region, AIPAC paid Meta about as much for ads in the 15 weeks following October 7th as the entire year before.

“Our effort is directed to encouraging pro-Israel Americans to stand with our democratic ally as it battles Iranian proxies in the aftermath of the barbaric Hamas attack of October 7th,” Marshall Wittmann, a spokesperson for AIPAC, said in an emailed statement. 

(See the data on our Github repo).

Other ad campaigns mentioning Israel supported different sides of the conflict. Doctors Without Borders, for example, used advertising to highlight the humanitarian crisis in Gaza. Other ads defended and promoted Israel. The Christian Broadcasting Network tied the October 7th attack to a claim in an ad that Iran’s “final, deadly goal” was “to establish a modern caliphate—an Islamic-founded, tyrannical government—across the world.”

Meta, the parent company of Facebook and Instagram, takes in the vast majority of its revenue from targeted advertising. The company tracks users online to profile their habits and, when a business or organization wants to reach them, lets those businesses pay to send ads to people who might be interested. Those ads might be tied to something perfectly wholesome, like gardening. But the company’s algorithms don’t distinguish between simple hobbies and something darker.

Meta spokesperson Tracy Clayton said in an emailed statement that Meta did not ultimately profit from political violence, as advertisers broadly back away from advertising during times of strife for fear their ads will be promoted alongside news of the violence. 

Clayton noted Meta’s chief financial officer recently said on an earnings call that it is “hard for us to attribute demand softness directly to any specific geopolitical event” but had seen lower ad spending “correlating with the start of the conflict” in the Middle East, and had seen similar at the start of the war in Ukraine.

“Advertisers responding to current events are nothing new, and it’s seen across the media landscape, including on television, radio, and online news outlets,” Clayton said. “All ads that run on our platform must go through a review process and adhere to our advertising and community standards, and Meta offers an extra layer of transparency by making them publicly available in our Ad Library.”

CalMatters and The Markup used Meta’s own tools to calculate how much Meta makes from spikes in advertising when instances of political violence happen, reviewing thousands of ads through both manual review and with the assistance of an AI model offered by Meta itself. (We also made improvements to Meta Research’s scripts for accessing the Ad Library API, and we’re sharing our changes.)

To examine the assassination attempt merchandise, we ran a simple search of Meta’s Ad Library for ads that mentioned “assassination,” including any in our analysis that also mentioned “Trump” and hundreds of others that didn’t mention the former president by name but were clearly related to the shooting.

“First they jail him, now they try to end him,” one ad read. A conspiratorial ad for a commemorative two-dollar bill claimed “the assassination attempt was their Plan B,” while “Plan A was to make Biden abandon the presidential campaign.” Some ads used clips from the film JFK to suggest an unseen, malevolent force was at work in the shooting.

Gun advocates paid for ads, using the assassination attempt as a foreboding call to action. One ad promoting a firearms safety course noted that “November is fast approaching.” A clothing business said in an ad that, since “the government can’t save you” from foreign enemies, Americans “need to be self-reliant, self-made, and self-sufficient.”

“Because when those bullets zip by, you are clearly on your own,” the ad read.

Most of those ads did not appear to violate Meta’s policies, although some may have broken its ban against showing weapons while alleging “election-related corruption.” But even the ones that didn’t clearly violate Meta’s rules still place the company in an uncomfortable position, as the business takes in advertising dollars from posts tied to grim news cycles. 

CEO Mark Zuckerberg himself commented on the first Trump assassination attempt, saying in an interview that it was “one of the most badass things I’ve ever seen in my life.” Trump has now survived a second apparent assassination attempt, and Zuckerburg’s company has made millions of dollars through political advertising tied to these and other violent acts. 

Katie Paul, director of the Tech Transparency Project, a nonprofit advocacy organization, said “it’s not a surprise” that ads around political violence would pop up after incidents “if Meta is not making any effort even on a good day to effectively enforce their policies.”

“There’s huge problems with their advertising broadly,” she said. “They’re profiting off of a lot of harmful things, really without any sort of repercussions.” 

A Trump-fueled business and cash from war

Many businesses paying for the assassination ads sold pro-Trump gear before the shooting — and some might have spent a similar amount on ads if the shooting never happened.

But for some, the assassination attempt effectively became an entire business strategy, according to the review of Meta advertising data.

A clothing company called Red First, which offers everything from customized shirts for pet owners to flags saying “Hillary belongs in prison,” offered assassination-related merchandise through a network of pages with names like 50 Stars Nation and Red White and Blue Zone.

The company, which operates in California and Vietnam, according to Meta’s required disclosures, has spent more than $1.8 million since February 2023 to promote ads through its various pages. But in the wake of the shooting, the company pivoted to merchandise around the event. 

Red First’s ads were relatively innocuous compared to some that sprang up after the shooting – they promoted Trump, not the shooting, and not the idea of retaliation for it. One shirt showed an illustration of Trump, middle fingers in the air, and the words “you missed bigly.” The company has also offered Kamala Harris merchandise, recently launching a page dedicated to it as well.

But the ads related to the shooting simultaneously sold products, promoted Trump, and let Meta reap advertising cash from the incident.

Many of the thousands of ads posted by the company didn’t explicitly use the word “assassination,” but clearly referenced the event in other ways, using slogans like “he will overcome,” “fight fight fight,” “legends never die,” and “shooting makes me stronger.”

To suss out which ads were related to the shooting, we reviewed more than 4,200 ads from the company’s different pages with the assistance of a large language model named Llama, a Meta AI model. 

We programmed the model to evaluate the text of each ad to determine whether it was related to the assassination attempt, then manually reviewed hundreds of its classifications to ensure it was working as expected.

After our review, we determined that more than 2,600 of those more than 4,200 ads were related to the assassination attempt. The total Red First paid to Meta in the 10 weeks after the shooting for those ads: between $473,000 and $798,000.

Red First lists a phone number and street address in Southern California, but didn’t respond to phone or email, and the listed address is for a mail-opening service.

The NRA and violent ads around the globe

The advocacy organization the Tech Transparency Project has charted how the National Rifle Association has paid to promote pro-gun views on Meta and Google’s ad platforms after mass shootings. Despite calls from tech company executives for gun control, those companies profit from NRA spending that spikes after shootings, the group has pointed out. 

After the mass school shooting in Parkland, Fla., the NRA increased its spending on Google and Facebook ads, the Tech Transparency Project noted in one report. In 2018, the year of the shooting, Meta received “more than $2 million in advertising fees from the NRA starting in May of that year,” the report found, which also found that “NRA ad spending reached its highest levels on Google and soared on Facebook” following a week of mass shootings the following year that left dozens of people dead. 

Just days before the January 6th insurrection, the Tech Transparency Project found that Meta hosted ads offering gun holsters and rifle accessories in far-right Facebook groups. 

Internationally, Meta has often lapsed in its pledge to keep violent content off its platforms.  

Meta’s ad policies forbid calling for violence. But when faced with crucial tests of its content moderation practices, the company has repeatedly failed to detect and remove inflammatory ads. A 2018 report, commissioned by Facebook itself, found that its platform had been used to incite violence in Myanmar, and that the company hadn’t done enough to prevent it. 

Alia Al Ghussain, a researcher on technology issues at Amnesty International, said that as troubling as some ads might be in English, ads in other languages may be even more likely to pass Meta’s content moderation. “In most of the non-English-speaking world, Facebook doesn’t have the resources that it needs to moderate the content on the platform effectively and safely,” she said.

Despite later admitting responsibility for violence in Myanmar, the company continues to be faulted for gaps in its international moderation work. Another advocacy organization found in a test that the company approved calls for the murder of ethnic groups in Ethiopia. More recently, a similar test by an advocacy organization found that ads explicitly calling for violence against Palestinians—a flagrant violation of Meta’s rules—were still approved to run by the company. 

“If ads which are presenting a risk of stoking tension or spreading misinformation are being approved in the US, in English, it really makes me fearful for what is happening in other countries in non-English-speaking languages,” Al Ghussain said.