Why chaos in Washington can't hold California's economy back

The Democrat-led state foresaw trouble and took policy action early to insulate its prosperity from chaotic federal governance

- GAVIN NEWSOM & LENNY MENDONCA

Here is a paradox at the heart of the US economy. As the federal government imposes sweeping tariffs, signals hostility to multilateral trade and unnerves long-term investors with erratic policymaking, one state has emerged as the most reliable US address for global capital: California, the world’s fourth-largest economy and America’s second-largest exporting state with $188 billion in annual goods exports. In 2024, California’s GDP grew by 6%, outpacing the US, China and Germany.

This is not a partisan provocation, but a statement grounded in hard data and direct experience: We built the institutional architecture that has made the state resilient in the face of federal policy volatility. As governor and as the former chief economic and business advisor who helped design California's international investment strategy (an initiative now run by Dee Dee Myers), we undertook trade missions to Europe, Asia, Canada and Latin America; direct government-to-business outreach; and long-term investment compacts.

Now that strategy is paying off. Nearly 19,000 foreign-owned enterprises operate in California, supporting more than 814,000 jobs and paying an estimated $89 billion in wages to Californians—a figure that grew even as federal trade policy turned inward. The US Bureau of Economic Analysis confirms that California consistently ranks among the top two or three states on foreign direct investment.

To be sure, the headwinds President Donald Trump's administration has created must be acknowledged. Tariffs raise input costs across supply chains and policy unpredictability suppresses long-term capital commitments that drive investment. No state, however large, is fully insulated from national macroeconomic conditions.