Trump's tariffs threaten Southern California's $300-billion trade industry, report says
The report, commissioned last year by the public policy group Southern California Leadership Council, comes as economists and business owners alike raise alarm about the toll an escalating trade war could take on the U.S. economy.
Particularly in Southern California, home to the nation's two largest ports, goods exchange with China — subject to the steepest of Trump's tariff hikes — is a boon to local industry. Jeopardizing that long-term trade relationship could have severe consequences, former California governor and SCLC co-Chair Gray Davis said Tuesday in a news conference.
"This is like having a winning sports team and deciding to trade all your players," Davis said.
Read more: L.A. was forged by global commerce. Can the metropolis we know survive the Trump trade wars?
Southern California's trade and logistics industry in 2022 contributed nearly $300 billion in direct economic output and generated an estimated $93.3 billion in tax revenue, according to the development corporation's report.
The sector also supported nearly 2 million jobs, directly employing more than 900,000 workers with an average salary of more than $90,000, which was 26% higher than the average annual wage reported across Southern California.
As for trade volume, the San Pedro Bay ports in 2022 handled 19 million 20-foot container equivalent units (nearly 35% of all U.S. waterborne containerized trade) with total cargo value surpassing $469 billion — making it the busiest container complex in the country and the ninth-largest worldwide, the report said.
An escalating trade war with China joins a growing list of threats to Southern California's competitive edge in the trade industry.
'China represents Southern California's largest trading partner, with about $130 billion of Chinese imports flowing through the Ports of Los Angeles and Long Beach in 2024," the report said. "A 145 percent tariff on Chinese goods — coupled with a retaliatory 125 percent Chinese tariff on U.S. goods — can be expected to dramatically curtail the region's trade with China.'
Read more: Strollers and other baby products will get more expensive — and harder to find — with tariffs
The report added that the Port of Los Angeles already expects cargo volumes to drop by at least 10% as early as May. Loads aren't expected to recover again for the rest of the year.
"This translates into less work across the region's supply chains, affecting port operators, haulers, wholesalers and other workers," the report said. "It also leaves thousands of Southern California importers facing inputs that potentially are two-and-a-half times more expensive, and these cost increases would get passed down to consumers across the region."
Economic uncertainty surrounding the tariffs could threaten foreign investment in the region, the report said, leaving foreign-owned enterprises — which currently employ nearly 67,000 workers and generate $5.8 billion in wages in the Southern California region — to take their business elsewhere.
Davis said that while he supports some of the underlying goals of the tariffs, including bringing manufacturing to the U.S., he doesn't believe Trump's strategy of "hammering people over the head" will be effective with business leaders.
Instead, Davis said, officials should implement financial incentives such as those established by the 2022 CHIPS Act, which provided funding for chip manufacturing facilities and offered tax credits for investments in chip production. The LAEDC report recommended similar incentive programs for pushing the industry toward clean energy solutions.
Read more: He's training the world's next microchip leaders. Here's why he worries
While the LAEDC did not provide any projections Tuesday for financial losses as a result of the tariffs, Chief Executive Stephen Cheung said the 2018 U.S.-China trade war might provide clues.
At that time, China imposed retaliatory tariffs on goods including wine. Immediately afterwards, the amount of U.S. wine exported to China dropped 25%, Cheung said.
"If you use the same logic model, you can see how it's going to hit us pretty significantly," he said.
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This story originally appeared in Los Angeles Times.
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