Donald Trump’s victory in November’s presidential election has added multiple variables to the state and national economic picture — such as promised tariffs on foreign goods and a deportation campaign — leading to “great uncertainty” about the U.S. economy for 2025 and 2026, according to a UCLA forecast released Wednesday.
“The general nature of the incoming administration’s intended policies is clear and includes tariffs, deportations, tax cuts, and deregulation,” UCLA Anderson Forecast economist Clement Bohr wrote in a report on the national economy. “However, the exact contours of these policies remain to be seen because of practical, legal, and political constraints as well as the nondescript and often-shifting preferences of the president-elect.
“… While there is great uncertainty surrounding the details of these policies, they all point in one direction: the impact they will have on the cost of living. Tariffs will undoubtedly raise the price level for many goods and services. Deportation policies will create labor shortages in agriculture, non-durable manufacturing, construction and leisure and hospitality services, which will lead to higher prices both because of product shortages and higher labor costs. Lastly the tax cuts may further stimulate an economy that is already at risk of remaining overheated.”
Bohr wrote that the tariff and deportation policies will drive up costs and put “downward pressure” on consumption, leading to lower GDP growth nationally, dipping below 2% in the second half of 2025. Bohr predicted that GDP growth will “partially recover” by the end of 2026 “as the economy adjusts to the tariffs and the changing composition and size of the labor force.”
But the exact impacts are hard to nail down.
In his report on California’s economic forecast, UCLA Anderson Forecast Director Jerry Nickelsburg noted that Trump’s announced plans for tariffs on Mexican imports have already prompted negotiations between that country and the president-elect, leaving the impact on the state unclear.
Immigration policy, meanwhile, could have two impacts on the state, the first being a “withdrawal of millions of undocumented workers from the U.S. labor force either through the deportation process or because they have voluntarily stopped working in high-risk-of-deportation jobs,” Nickelsburg wrote.
He noted that it’s unclear if a deportation campaign would include a “Bracero program as in the Eisenhower years after mass deportations depleted the agricultural workforce.”
“Even if it were to happen, it likely would only benefit agriculture in the state, as construction, hospitality, health care, daycare and other services sectors would have a heavier lift getting a similar, large-scale program in place,” he wrote.
Also worthy of note in the Trump administration’s immigration policy will be H1B visas for workers in the tech industry.
“With respect to H1B visas, the emphasis the new administration is expected to place on growth in technology suggests that this will benefit California’s tech industry,” according to Nickelburg’s report.
Nickelsburg concluded that California’s economy will likely grow at about the same rate as the national economy in 2025 and 2026. He predicted an average unemployment rate of 5.3% during the fourth quarter of this year, while the average for 2025 will be 5.5% and then 5% in 2026.