Economic growth in the United States and California is being restrained by the Trump administration’s erratic trade policies and escalating tariffs, according to the UCLA Anderson School of Management Forecast. The summer outlook highlighted pronounced volatility and uncertainty in the second fiscal quarter, forecasting weaker job creation, elevated unemployment, and rising inflation through year-end, with a modest recovery expected by mid-2026.
The report suggests that higher tariffs will particularly affect Southern California’s housing and construction industries, especially in light of the January Eaton and Palisades wildfires that damaged around 12,000 homes.
Historically, California’s economy has outpaced national growth, expanding 111% over the past 25 years compared to the U.S. average of 75%, as noted by the Public Policy Institute of California. However, Jerry Nickelsburg, former faculty director of the Anderson Forecast, cautioned that the state’s growth momentum may soon lag behind the rest of the nation.
Sectors that previously drove California’s outperformance since 2000 – such as technology, durable goods manufacturing, entertainment, and logistics – have either stagnated or contracted, he observed.
The state faces a shortfall of approximately 50,000 payroll jobs, and Nickelsburg projects the unemployment rate could climb to 6.1% by year-end. He emphasized that deportation efforts are unlikely to improve job availability, particularly in healthcare, hospitality, social services, and construction.
During the initial 100 days of President Trump’s second term, over 66,000 immigration arrests were recorded nationwide, with nearly 2,800 in Los Angeles in June alone. Nickelsburg pointed out that many undocumented workers perform physically demanding roles in agriculture, food processing, and construction that may not suit all domestic laborers.
Clement Bohr, a senior economist at the Anderson Forecast, added that removing immigrant workers often leads to broader job losses, as entire projects stall without essential labor. For example, a missing roofer can eliminate the need for site supervisors, compounding unemployment.
The recently passed budget reconciliation bill, referred to by Trump as “The One Big Beautiful Bill,” is expected to dampen economic expansion. Bohr warned it would deepen the national debt, currently at $37 trillion, and increase the federal deficit. By 2034, millions could lose access to health coverage or food assistance, according to the Associated Press.
Provisions like tax exemptions on tips or deductions for seniors represent minor components of the legislation, Bohr noted, with larger tax and spending cuts forming the core.
The bill allocates $350 billion to border security and immigration enforcement, supporting the administration’s goal of deporting one million people annually. This includes funding for detention facilities and hiring 10,000 new ICE agents.
Bohr dismissed the notion that removing undocumented immigrants would free up jobs for citizens, calling it unrealistic in the near to medium term.
Tariffs, averaging 15% on imported goods and reaching 17.4% by September 4, are another source of instability. Though initially imposing a 145% levy on Chinese imports, the administration later reduced it to 30%. These measures, often used as negotiation tactics, create uncertainty for trade partners.
S. Sayantani, another economist with the forecast, warned that tariffs on key construction materials – gypsum, steel, and aluminum, primarily sourced from Mexico, Canada, and China – could raise building costs by 1.2% to 2%. These materials are vital for drywall, structural framing, and roofing, respectively.
Higher costs may delay fire recovery in Los Angeles and worsen the housing affordability crisis. California’s reliance on imports of electrical equipment from China, aluminum from Mexico, and wood products from Canada heightens its vulnerability to trade disruptions.
Despite demand from fire-displaced residents, developers are expected to remain cautious due to pricing uncertainty. Sayantani recommended diversifying supply chains and enhancing inter-agency coordination to accelerate rebuilding.
“This level of volatility we’ve seen recently isn’t disappearing,” Bohr said. “We’re still facing a prolonged period of economic unpredictability.”
— news from Daily Bruin
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Anderson Forecast finds Trump’s tariffs slow US, California economic growth
The Trump administration’s unpredictable international trade policies and rising tariffs are slowing economic growth in the United States and California, according to researchers at the UCLA Anderson School of Management Forecast. n nThe summer forecast reported that the second quarter of the fiscal year experienced significant “volatility and uncertainty” – predicting weaker job growth, high unemployment rates and higher inflation through the end of the year, with gradual economic recovery starting in mid-2026. n nAccording to the report, the economic impacts of rising tariffs will be particularly visible in Southern California’s housing and construction sectors – especially in the aftermath of the January Eaton and Palisades wildfires, which destroyed approximately 12,000 properties. n nCalifornia’s economy has historically outperformed growth in states across the U.S. – over the past 25 years, it has grown 111% in comparison to the nation’s 75% growth, according to the Public Policy Institute of California. However, Jerry Nickelsburg, the Anderson Forecast’s former faculty director, said in the report that he predicts the state’s growth will soon fall behind the rest of the country. n n“The sectors that previously fueled better-than-US growth rates since 2000 have been stagnant or contracting, including tech, durable goods manufacturing, entertainment and logistics,” he said in the report. n n[Related: Anderson Forecast predicts possible recession due to Trump administration policies] n nThe state experienced a deficit of about 50,000 payroll jobs – positions reported by employers and subject to taxes – according to the report. Nickelsburg said in the report that he projects California’s unemployment rate will rise to a peak of 6.1% by the end of the year. n nDeportations will not improve unemployment rates in California, Nickelsburg said in the report, adding that health care, leisure and hospitality, social services and construction will be impacted. n nDuring President Trump’s first 100 days of his second term, over 66,000 immigration arrests were made nationally, according to U.S. Immigration and Customs Control. Immigration enforcement agencies arrested nearly 2,800 people in Los Angeles in June, according to NBC. n n“Some of the people who could potentially take jobs in agriculture, in food processing and construction would not be physically qualified to do it,” Nickelsburg said in an interview. “It’s hard, physical work.” n nClement Bohr, a senior economist with the Anderson Forecast, also said deportations do not typically improve unemployment rates and often lead to higher unemployment for domestic workers due to the loss of jobs that depend on both domestic and immigrant workers. n n“Instead of actually boosting wages and employment with local workers, when you deport these people, it actually leads to higher unemployment with domestic workers as well,” he said. “For instance, if you don’t have a roofer that’s putting roof on your house, then you also don’t need a manager to facilitate that construction site because that whole house is just not going to get built.” n nHis report also said the budget reconciliation bill passed July 4 – dubbed the “The One Big Beautiful Bill” by Trump – partially slows down projected economic growth. Bohr added in the report that the bill will exacerbate the country’s rising debt, which is currently estimated at $37 trillion, according to the U.S. Treasury. n nThe bill will increase the federal deficit – the gap between what the government spends and the revenue it collects – and will result in millions of Americans losing health coverage or access to food assistance by 2034, according to the Associated Press. n n“What the bill does when it comes to these other provisions – like the no tax on tips and tax deductions for the elderly – those are very small provisions relative to the other tax cuts and spending cuts,” Bohr said. “They aren’t really the main meat of the bill.” n nThe bill also increased funding to federal immigration agencies to reach the Trump administration’s deportation goal of 1 million people per year, according to AP. It allocated $350 billion to border enforcement and national security – including funding for the U.S.-Mexico border wall, 100,000 migrant detention facility beds and 10,000 new Immigration and Customs Enforcement officer positions. n n“What they argue is that, ‘Well, if we get rid of all these undocumented immigrants, there’ll be more jobs for our domestic workers,’” Bohr said. “But that’s very unlikely to happen in the short or medium run.” n nThe report also cited rising tariffs – government-imposed taxes on imported goods – as a driving force in economic instability. The Trump administration imposed tariffs as high as 145% on China temporarily but paused the policy shortly after enacting it, instating a 30% tariff instead. The average 15% tariff rate on international trade importers – which reached 17.4% as of Sept. 4 – is subject to escalation depending on new policy decisions and retaliatory trade measures, according to the report. n nThe forecast is based on the baseline 15% tariff rate, which Bohr said he believed was the “worst-case scenario” when President Trump was campaigning for presidency last fall. n n“The future trajectory of tariffs remains unpredictable. Many tariffs are imposed merely to provoke a reaction,” Bohr said in the report. “Other tariffs are implemented to promote domestic industries in the name of national security and are likely to be more enduring.” n nRising long-term interest rates have contributed to a “growing perception” that the U.S. is a “riskier investment destination,” Bohr said in the report. He added in an interview that he believes Trump’s strategy is to start negotiations with a large threat, then deescalate his offer to strike a deal with trade partners. n n“Trump always goes big initially with a big threat in order to really light a fire under whoever he’s trying to make a deal with in order to get a reaction,” Bohr said. n nThe report warns that tariffs on building materials such as gypsum, steel and aluminum – largely imported from Mexico, Canada and China – could raise construction costs by 1.2% to 2%, S. Sayantani, an economist with the Anderson Forecast, said in an interview. n nThis rise in construction costs can delay LA’s fire recovery efforts and worsen the state’s housing affordability crisis, Sayantani said in the report. Three main resources are integral to rebuilding efforts – gypsum is used to create drywall plaster, steel is used to structure houses and aluminum is used to build doors, windows and roofing. n n“The state’s high dependence on specific imports, especially electrical equipment from China, aluminum from Mexico and wood products from Canada, amplifies its exposure to trade policy changes,” Sayantani said in the report. “California’s construction economy is vulnerable to price increases from tariffs on these key materials.” n nDespite increased demand for houses from displaced residents whose homes were destroyed by the fires, developers and contractors are likely to remain cautious about new projects as prices remain uncertain due to fluctuating tariffs, according to the forecast. n nSayantani said she believes California must diversify its supply chains to make the state less dependent on imported materials. As LA rebuilds, Sayantani added that she encourages different governmental agencies to collaborate to help expedite rebuilding efforts. n n“This level of volatility that we’ve seen over the last couple of months is not going away,” Bohr said. “We still have a long way to go in terms of a volatile and uncertain economic environment.”