Trump’s tariffs are threatening California’s cash cow

Summary

POLITICO Tech Podcast Summary Episode Title: Trump’s tariffs are threatening California’s cash cow
Release Date: March 7, 2025
Host: Steven Overlea
Guest: Chase Di Felici Antonio, AI and Automation Policy Reporter, POLITICO

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Introduction

In this episode of POLITICO Tech, host Steven Overlea delves into the repercussions of former President Donald Trump's tariff policies on California's booming tech industry. With tariffs impacting key technology goods such as smartphones and microchips, the discussion explores the broader economic and political implications for one of the nation's most influential states in the tech sector.

Change in Podcast Schedule

Steven begins by announcing a new episode release schedule:

“Starting next week, you'll hear new episodes of the show on Mondays and Thursdays. You can still expect timely conversations about tech and politics now with deeper reporting and insights from yours truly.” (00:30)

This adjustment aims to provide listeners with more frequent and in-depth analysis of ongoing tech and political developments.

Impact of Trump's Tariffs on California's Tech Industry

Immediate Concerns: Stock Market and Big Tech Valuation

Chase Di Felici Antonio explains that the reinstatement and subsequent adjustments of tariffs by the Trump administration have caused significant unease among stakeholders in California's tech industry. The immediate fallout is evident in the stock market:

“I think the most immediate concern is just the stock market and particularly big tech companies in California losing some value in the immediate term in the wake of these tariffs.” (02:21)

He elaborates that since the initial announcement in January, the implementation of additional tariffs has led to a noticeable decline in the stock values of major tech firms, which directly affects California's state budget reliant on these companies' financial health.

Tariffs' Effect on the Tech Supply Chain

Antonio highlights the specific challenges tariffs impose on the tech sector, particularly companies with intricate international supply chains:

“You're talking about companies like Apple and Nvidia. They make chips, they make phones, and there are a lot of highly machine specialized parts that are not just made overseas, but that in many cases move back and forth across borders quite a bit.” (03:10)

The tariffs increase costs for components and products, potentially leading to higher consumer prices and squeezed profit margins for tech companies. This situation is exacerbated as goods may incur multiple tariffs at different stages of the supply chain.

Long-Term Economic Consequences for California

The conversation shifts to the broader, long-term implications of sustained tariffs on California’s economy. Antonio references discussions with Scott Wiener, State Senate Budget Chair:

“It absolutely could harm California's budget. ... the longer the tariffs are in place, the more likely it is to cause economic pain across the board.” (04:18)

He underscores that California’s budget heavily depends on the prosperity of its tech giants. Prolonged tariffs could diminish tax revenues, leading to tighter state finances and potential cuts in public services or investments.

State Finance Department’s Perspective

A notable moment in the discussion is when Antonio shares a pointed observation from the State Finance Department:

“You don't have to be Warren Buffett to figure this out.” (05:36)

This remark emphasizes the straightforward economic logic linking tariffs to negative outcomes for California's tech sector and, by extension, the state’s fiscal health.

Tech Industry's Response and Political Ramifications

Industry Influence and Potential Reactions

Steven inquires about the tech industry's response to the tariffs, noting past instances where other sectors, like automotive, successfully lobbied against tariff implementations. Antonio responds:

“These are industries that do have some pull, that are multi, multi billion dollar industries... they are certainly an industry that has quite a bit of influence and cash.” (06:29)

He indicates that while explicit responses from tech companies are yet to surface, the industry's substantial influence could lead to strategic lobbying or negotiations to mitigate tariff impacts.

Political Rallying Around Tariffs in California

The potential for tariffs to become a political issue in California is explored. Antonio mentions feedback from Assembly Budget Committee Chair Jesse Gabriel:

“Trump's tariffs are self defeating and that it could have ultimately harm California businesses and residents.” (07:33)

Given the critical link between the tech sector's success and California's economic well-being, tariffs could serve as a potent political tool for legislators aiming to critique federal trade policies and advocate for the state's economic interests.

Broader Tech Policy Battles in California

Beyond tariffs, the episode examines ongoing tech policy initiatives within California, highlighting the state's proactive stance on regulating emerging technologies.

Focus on Artificial Intelligence (AI) Regulation

Antonio outlines key legislative efforts aimed at governing AI:

• Scott Wiener’s AI Safety Bill: A refined version of last year’s initiative, seeking to ensure AI technologies operate safely and ethically.
• Assemblymember Rebecca Bauer Cahan’s Legislation: Proposals to combat deepfakes and eliminate bias in automated decision-making systems.

He notes:

“There's certainly a lot of appetite for this kind of legislation. It's different than what we've seen in the past.” (08:53)

This shift towards more targeted AI regulations reflects lessons learned from previous legislative cycles, emphasizing precision and effectiveness in addressing technological challenges.

Conclusion

The episode concludes with a recap of the intertwined nature of federal trade policies and state-level economic health, particularly in tech-centric regions like California. The discussion underscores the importance of strategic policy-making in safeguarding both industry vitality and public finances.

Chase Di Felici Antonio’s insights provide a comprehensive understanding of the immediate and long-term impacts of Trump's tariffs, as well as the broader legislative landscape shaping California’s tech future.

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Key Takeaways:

• Immediate Impact of Tariffs: Declining stock values of major tech companies threaten California’s state budget.
• Supply Chain Disruptions: Increased costs and logistical challenges for tech manufacturers relying on international components.
• Long-Term Economic Risks: Sustained tariffs could lead to reduced tax revenues and economic strain within the state.
• Political Implications: Tariffs may become a focal point for California legislators opposing federal trade policies.
• Ongoing Tech Legislation: California continues to lead in regulating AI and combating technological threats like deepfakes.

Notable Quotes:

• “I think the most immediate concern is just the stock market and particularly big tech companies in California losing some value in the immediate term in the wake of these tariffs.” – Chase Di Felici Antonio (02:21)
• “You don't have to be Warren Buffett to figure this out.” – State Finance Department Spokesperson (05:36)
• “Trump's tariffs are self defeating and that it could have ultimately harm California businesses and residents.” – Jesse Gabriel (07:33)

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For more detailed analysis and upcoming discussions on tech and politics, subscribe to POLITICO Tech and follow their newsletters, Digital Future Daily and Morning Tech.

Transcript

[Steven Overlea]

Your data is like gold to hackers. They'll sell it to the highest bidder. Are you protected? McAfee helps shield you blocking suspicious texts, malicious emails and fraudulent websites. McAfee Secure VPN lets you browse safely and its AI powered tech scam detector spots threats instantly. You'll also get up to $2 million of award winning antivirus and identity theft protection, all for just $39.99 for your first year. Visit McAfee.com, cancel anytime terms apply. Hey, welcome to Politico Tech. Today is Friday, March 7th. I'm Steven Overle. Some exciting news here at Politico Tech. Starting next week, you'll hear new episodes of the show on Mondays and Thursdays. You can still expect timely conversations about tech and politics now with deeper reporting and insights from yours truly. So be sure to subscribe. You don't want to miss future episodes on the show. Today we're talking tariffs. President Donald Trump put them in place again. He then walked most of them back again. And the administration's erratic trade policy isn't just creating tension with China, Canada and Mexico. It's also causing a great deal of anxiety in California. The state reaps a lot of tax revenue from the tech industry, so looming tariffs on smartphones and microchips and other tech goods would be bad for the budget. Chase Di Felici Antonio recently joined Politico to cover AI and automation policy from San Francisco, and he co authors POLITICO's new California Decoded newsletter about tech politics and policy in the Golden State. On the show today, Chase tells me why lawmakers and economists from Sacramento to Silicon Valley are nervous. Here's our conversation. Chase, welcome to Politico Tech.

[Chase Di Felici Antonio]

Good to be here.

[Steven Overlea]

So Trump's tariffs are causing special consternation in California, home of the tech industry. What are you hearing in terms of the near term concerns that lawmakers have?

[Chase Di Felici Antonio]

I think the most immediate concern is just the stock market and particularly big tech companies in California losing some value in the immediate term in the wake of these tariffs. You might say this goes back to January when tariffs were initially announced. Then this week more tariffs took effect. That really affects the stock market. Large tech companies losing single digit percentage in value. I mean, obviously the stock market moves quite a bit, but that makes people very nervous because there is a connection between California's budget and how well particularly big tech companies are doing, big public tech companies are doing.

[Steven Overlea]

And what are the expected impacts of these tariffs on the tech sector. I mean, obviously tech has a lot of ties to China, also to Mexico and Canada. What are the concerns that this will mean for the industry?

[Chase Di Felici Antonio]

I think in the immediate term, the tariffs on China are the biggest issue at the fore for big tech. I mean, you're talking about companies like Apple and Nvidia. They make chips, they make phones, and there are a lot of highly machine specialized parts that are not just made overseas, but that in many cases move back and forth across borders quite a bit. You could have instances where tariffs affect a single product multiple times. So I think that goes down the supply chain. Smaller companies that are building small drones or whatever else it may be. But I think in the immediate term for big companies, particularly based in California, that are manufacturing things that the rest of the tech industry needs to function, that's where the biggest immediate concern is as far as tariffs.

[Steven Overlea]

And so obviously if tariffs continue to be left in place, there are longer term concerns as well. Right. About prices going up for products and how that not only impacts consumers, but perhaps the bottom line of these companies. When you talk to folks about the potential long term consequences here for California, what do they have to say?

[Chase Di Felici Antonio]

Yeah, myself and my colleague Tyler Katzenberger, a Sacramento based tech reporter, he specifically talked to Scott Wiener, who is the state Senate Budget chair and a state senator from San Francisco. He particularly said it absolutely could harm California's budget. I mean, again, speaking in the long term here, but that this is something that is very clear and has been clear for some time that there have been plenty of reports that have come out from the Legislative Analyst's Office in California looking at the effect and the connection between how well the stock market does, how well big tech does, and the revenues that the state sees in terms of taxes. The long and short of it is the longer the tariffs are in place, the more likely it is to cause economic pain across the board. So that is true. More likely for big tech companies to potentially cut into their profits, but then you can also see that potentially move down the food chain in the industry. And that's when things start to get a little bit more unsure. I mean, that's when you're kind of reading the tea leaves. Economists get a little dodgy about whether or not this is necessarily going to happen. But the common line does seem to be that the longer these tariffs are in effect, the more likely it is to potentially create changes in a company's bottom line and to have other effects.

[Steven Overlea]

There was a quote in your piece I had a laugh at from the state Finance Department spokesperson saying you don't have to be Warren Buffett to figure this out, which I thought was a punchy way to put it.

[Chase Di Felici Antonio]

Absolutely. I mean, some of the economists I talked to for our newsletter, I mean, they painted a broad picture, but they very much said this is pretty straightforward stuff as far as the economics is concerned. I'm not going to explain something to here that is going to surprise or knock your socks off. It's a known cause and effect type situation.

[Steven Overlea]

You know, we have seen already the auto sector sort of successfully convinced Trump to delay automobile tariffs by a month. Certainly the tech industry has influence in this administration. Folks like Apple CEO Tim Cook have already been cozying up to Trump on the tariff issue. Have you heard anything from tech on these tariffs or are you anticipating any sort of response from industry?

[Chase Di Felici Antonio]

I mean, I haven't heard anything in particular as far as tech response yet. I mean, again, these tariffs are kind of just taking effect. Their actual effect is somewhat unclear. But what is clear is that particularly with regards to things like semiconductor manufacturing, things that the Trump administration has very much talked about wanting to onshore bring back to America as a priority in a lot of different ways. I mean, these are industries that do have some pull, that are multi, multi billion dollar industries that as far as I know, there's not really anyone in the government who wants them to not do well. And it's seen as critical to the future of the economy, the AI industry, you name it. So it's definitely an industry that has quite a bit of influence and cash.

[Steven Overlea]

Obviously, California politics being what they are. You know, there's no shortage of criticism that Democrats there in the legislature and in the governor's mansion have for the Trump administration. Have you gotten any sense of whether these tariffs are going to become sort of a new political rallying cry there in California? Just given the impact on the tech sector in particular?

[Chase Di Felici Antonio]

I think it's something that reading the tea leaves is a possibility. We also talked to Assembly Budget Committee Chair Jesse Gabriel and he talked about this in his opinion being he felt it was evidence that Trump's tariffs are self defeating and that it could have ultimately harm California businesses and residents. These are kind of what lawmakers who are really in the weeds with budget issues in California were telling us. There is a, again, a very clear connection to be drawn between how well tech does and how well the budget is doing in California. This is one of the most profitable sectors in the country. It's one of the most profitable sectors in the world. These are some of the most profitable companies in the world. And I think if there is something a policy coming out of Washington that is negatively affecting tech and that is negatively affecting California. I mean, I think that could potentially be certainly a political leg to stand on for California legislators up and down the roster to say that this is not something that we're going to stand.

[Steven Overlea]

For or accept beyond the tariff issue. You know, through the California Decoded newsletter, you're covering broad range of tech policy battles there in California. Obviously, the nation watches California because it's at the forefront of so much of the regulation. What's the top of your list? What are you watching these days on the policy battle front?

[Chase Di Felici Antonio]

I mean, lawmakers are still writing bills, we're still getting our sea legs, but there's definitely a few places to watch. Senator Weiner, who I mentioned he has a revamped AI safety bill. It's a little more pared down than last year's effort, but will certainly be one that could grow and will certainly be garnering a lot of attention. Assemblymember Rebecca Bauer Cahan, she has a number of bills related to AI. One relating to cracking down even further on deepfakes, which you saw was really a focus of last year's session. Another relating to automated decision making systems, which can and can't be AI depending, but trying to root out bias in those. So there's certainly a lot of appetite for this kind of legislation. It's different than what we've seen in the past. Last year was an election year. There was a lot of focus on AI and deepfakes with regard to election information last year. So and you know, you're seeing some of these bills kind of focusing in on a particular area after the successes and failures of last year. So there's definitely a lot of action there and frankly, still more bills to come.

[Steven Overlea]

Well, we will be reading about it in California. Decoded Chase, thanks for being here on Politico Tech.

[Chase Di Felici Antonio]

Thanks for having me.

[Steven Overlea]

That's all for today's Politico Tech. If you enjoy Politico Tech, be sure to subscribe and recommend it to a friend or colleague. For more tech news, subscribe to our newsletters, Digital Future Daily and Morning Tech. Music in our show comes from the mysterious Breakmaster Cylinder. Our managing producer is Annie Reiss. Philip Frobos helped produce today's episode. I'm Stephen Overlea. See you back here on Monday.