Governor Newsom directs state to pursue strategic relationships with international trading partners; urges exemptions of California-made products from tariffs

Protecting California’s economic dominance 

California is the fifth-largest economy in the world, the strongest economy in the nation, and the largest importer among all U.S. states, with more than $675 billion in two-way trade supporting millions of jobs throughout the state. California’s gross domestic product of $3.9 trillion is 50% bigger than the GDP of the nation’s next largest state, Texas, and is the key to the United States’ economic growth. California sends more than $83 billion to the federal government annually.

California is home to the most Fortune 500 companies, beating out Texas, Florida, and all other states. California remains #1 in the nation for new business starts, #1 for access to venture capital funding, #1 for manufacturing, #1 for high-tech, and #1 for agriculture.

California stands as the center for manufacturing output in the United States with over 36,000 manufacturing firms and employing over 1.1 million Californians. Since California supplanted New York in 1965, our manufacturing firms have created new industries and supplied the world with manufactured goods spanning aerospace, computers and electronics, and, most recently, zero-emission vehicles.

California is home to 32 of the world’s 50 leading AI companies, high-impact research and education institutions, and a quarter of the technology’s patents and conference papers. California’s population has increased multiple years in a row and has one of the most equitable tax systems in the entire country. Travel spending reached an all-time high of $150.4 billion.

California’s long-standing commitment to global cooperation, innovation, and openness has helped power its rise to the world’s fifth-largest economy — leading in good-paying jobs to support California’s working families. With the Governor’s announcement today, the state will extend that leadership through strategic, mutually beneficial partnerships rooted in respect, trust, and shared growth.

Identifying partnerships 

With this announcement, Governor Newsom is directing his Administration to identify collaborative opportunities with trading partners that protect California’s economic interests — workers, manufacturers, and businesses — and the broader supply chains linked to the state’s economy. The administration will explore ways to:

• Support job creation and innovation in industries reliant on cross-border trade.
• Promote economic stability for businesses and workers impacted by federal trade disruptions.
• Safeguard access to critical supplies, such as construction materials needed for recovery efforts following the devastating Los Angeles firestorms.

Impact of tariffs on state trade

California’s economy and workers rely heavily on trade with Mexico, Canada, and China. Over 40% of California imports come from these countries, totaling $203 billion of the more than $491 billion in goods imported by California in 2024. The tariffs will also affect access to important construction materials critical to rebuilding after the Los Angeles fires, including timber and wood, steel and aluminum, and the most important components of drywall.

Retaliatory tariffs will also have an outsized impact on California businesses, particularly its more than 60,000 small business exporters. Mexico, Canada, and China are California’s top three export destinations, buying nearly $67 billion in California exports, which was over one-third of the state’s $183 billion in exported goods in 2024. Retaliatory tariffs also impact farmers and ranchers during a difficult time in the U.S. farm economy – fostering a greater need for mitigation and expanding foreign market share.

The magnitude of these tariffs on our North American allies, and the retaliation, will also result in major disruptions to cross-border supply chains, including the mutually beneficial co-production that takes place in the California-Baja mega-region. If these goods are taxed each time they cross the border, the price of the final product will rise and ultimately be passed on to California consumers. This will have far-reaching impacts, affecting everything from semiconductors to aerospace and automotive products.

Analysis by the Yale Budget Lab found that the tariffs announced by the Trump Administration thus far will likely result in a 2.3% increase in overall inflation this year alone — including a 2.8% increase in food prices and an 8.4% increase in automotive prices — translating to an impact of $3,800 on the average American household.

Long-standing international relationships

California has long been a key player on the international stage — from taking joint action on climate change to identifying new pathways and partnerships for sustained economic growth. During the Newsom Administration alone, California has signed 38 international agreements with 28 different foreign partners that lay critical groundwork for prolonged economic success as well as prioritizing workers and businesses that benefit from these new opportunities.