tariff

Southeast Asian leaders are set to hold their first ever summit with China and the six-member Gulf Cooperation Council (GCC), as they seek to insulate their trade-dependent economies from the effect of steep tariffs from the United States.

The meeting, in the Malaysian capital, Kuala Lumpur, is taking place on Tuesday, on the second day of the annual summit of the 10-member Association of Southeast Asian Nations (ASEAN).

It follows separate talks between leaders of the ASEAN and the GCC, which comprises of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Malaysian Prime Minister Anwar Ibrahim, opening the ASEAN-GCC summit, said stronger ties between the two blocs would be key to enhancing interregional collaboration, building resilience and securing sustainable prosperity.

“I believe the ASEAN-GCC partnership has never been more important than it is today, as we navigate an increasingly complex global landscape marked by economic uncertainty and geopolitical challenges,” Anwar said.

Malaysia is the current chair of ASEAN, which also includes Brunei, Cambodia, Laos, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

In written remarks before the meetings, Anwar said “a transition in the geopolitical order is underway” and that “the global trading system is under further strain, with the recent imposition of US unilateral tariffs.”

With protectionism surging, the world is also bearing witness to “multilateralism breaking apart at the seams”, he added.

China calls for stronger ties

China’s Premier Li Qiang, who arrived in Kuala Lumpur on Monday, will join ASEAN and the GCC in their first such meeting on Tuesday. He met with Anwar on Monday and called for expanded trade and investment ties between Beijing, ASEAN and the GCC.

“At a time when unilateralism and protectionism are on the rise and world economic growth is sluggish,” Li said, China, ASEAN and GCC countries “should strengthen coordination and cooperation and jointly uphold open regionalism and true multilateralism”.

China is willing to work with Malaysia to “promote closer economic cooperation among the three parties” and respond to global challenges, Li told Anwar.

ASEAN has maintained a policy of neutrality, engaging both Beijing and Washington, but US President Donald Trump’s threats of sweeping tariffs came as a blow.

Six of the bloc’s members were among the worst hit, with tariffs between 32 percent and 49 percent.

Trump announced a 90-day pause on tariffs in April for most of the world, and this month struck a similar deal with key rival China, easing trade war tensions.

Al Jazeera’s Rob McBride, reporting from Kuala Lumpur, said ASEAN members are “very much looking at building ties with other parts of the world, in particular China, but also the Middle East” to strengthen their economic resilience.

“A measure of the importance that the GCC is also placing on this meeting is the delegation that has been sent here and the seniority of its members,” he added. “The Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, is here, and we have crown princes from Kuwait and also Bahrain. We also have a deputy prime minister from Oman.”

Anwar said Monday he had also written to Trump to request an ASEAN-US summit this year, showing “we observe seriously the spirit of centrality.” However, his Foreign Minister Mohamad Hasan said Washington had not yet responded.

‘Timely, calculated’

ASEAN has traditionally served as “a middleman of sorts” between developed economies like the US and China, said Chong Ja Ian from the National University of Singapore (NUS).

“Given the uncertainty and unpredictability associated with economic relations with the United States, ASEAN member states are looking to diversify,” he told the AFP news agency.

“Facilitating exchanges between the Gulf and People’s Republic of China is one aspect of this diversification.”

Malaysia, which opened the bloc’s 46th summit on Monday, is the main force behind the initiative, he said.

China, which has suffered the brunt of Trump’s tariffs, is also looking to shore up its other markets.

Premier Li’s participation is “both timely and calculated”, Khoo Ying Hooi from the University of Malaya told AFP.

“China sees an opportunity here to reinforce its image as a reliable economic partner, especially in the face of Western decoupling efforts.”

Beijing and Washington engaged in an escalating flurry of tit-for-tat levies until a meeting in Switzerland saw an agreement to slash them for 90 days.

Chinese goods still face higher tariffs than most, though.

US president continues to fuel global economic uncertainty with erratic trade policy.

United States President Donald Trump has backed away from launching a trade war with the European Union, two days after threatening to impose punishing tariffs.

Trump said on Sunday that he has agreed to extend trade negotiations with the EU to July 9 following a call with European Commission President Ursula von der Leyen. As part of that agreement, the US will also hold back from imposing a 50 percent tariff on imports from the bloc, which Trump announced on Friday would be imposed on June 1.

The announcement is the latest U-turn on US trade policy in a long series in recent months, and will only add to the uncertainty that Trump’s erratic and unpredictable policy is casting over the global economy.

Trump said, “[von der Leyen] said she wants to get down to serious negotiation. We had a very nice call.”

“She said we will rapidly get together and see if we can work something out,” he told reporters.

The European Commission chief noted that she had shared a “good call” with Trump and that the EU was ready to move swiftly.

Backtracked

Trump set a 90-day window for trade negotiations with the EU in April, making them due to end on July 9.

He had backtracked on Friday, saying he was not interested in reaching an agreement at all and escalated the transatlantic trade dispute.

“I’m not looking for a deal,” the president said. “We’ve set the deal – it’s at 50 percent.”

However, by Sunday, he welcomed von der Leyen’s assertion that the bloc is willing to negotiate but needs more time.

“Europe is ready to advance talks swiftly and decisively,” she recapped on X. “To reach a good deal, we would need the time until July 9.”

The bloc’s top trade negotiator, Maros Sefcovic, had on Friday urged the US to show “mutual respect, not threats”.

Trump roiled financial markets with his Liberation Day announcement in April, which threatened sweeping tariffs on multiple countries.

However, amid nosediving markets, threats of retaliation, and turmoil across the globe, the US president has in many cases softened his stance in favour of negotiations.

Washington has made deals with the United Kingdom and opened talks with China. Those moves have buoyed markets somewhat, but uncertainty persists as the US stance continues to shift.

WASHINGTON — President Trump said Sunday that the U.S. will delay implementation of a 50% tariff on goods from the European Union until July 9 to buy time for negotiations with the bloc.

That agreement came after a call Sunday with Ursula von der Leyen, the president of the European Commission, who had told Trump that she “wants to get down to serious negotiations,” according to the U.S. president.

“I told anybody that would listen, they have to do that,” Trump told reporters Sunday in Morristown, N.J., as he prepared to return to Washington. Von der Leyen, Trump said, vowed to “rapidly get together and see if we can work something out.”

In a social media post Friday, Trump had threatened to impose the 50% tariff on EU goods, asserting that the 27-member bloc had been “very difficult to deal with” on trade and that negotiations were “going nowhere.” Those tariffs would have kicked in starting June 1.

But the call with Von der Leyen appeared to smooth over tensions, at least for now.

“I agreed to the extension — July 9, 2025 — It was my privilege to do so,” Trump said on social media shortly after he spoke with reporters Sunday evening.

Von der Leyen said the EU and the U.S. “share the world’s most consequential and close trade relationship.”

“Europe is ready to advance talks swiftly and decisively,” she said. “To reach a good deal, we would need the time until July 9.”

Kim writes for the Associated Press.

US President Donald Trump is once again taking aim at trading partners of the United States. This time it’s the European Union.

The US president is now threatening to impose a 50-percent tariff on all goods from the EU starting June 1. If he follows through, that will mean much higher import taxes on the EU’s hundreds of billions of dollars’ worth of exported goods.

So is Europe about to pay a high price for not settling with Trump sooner? Or will Trump’s tariffs – now his signature move – backfire for US manufacturing?

Presenter: Tom Mcrae

Guests:

Paolo von Schirach, President, Global Policy Institute

Will Hutton, President, Academy of Social Sciences.

Brian Wong, Fellow, Centre on Contemporary China and the World

May 23 (UPI) — President Donald Trump on Friday threatened tariffs against Apple on iPhones that are manufactured outside of the United States.

Trump said in a Truth Social post that a tariff of “at least 25%” will be levied on future iPhones that are manufactured internationally and sold in the United States.

“I long ago informed Tim Cook of Apple that I expect their [iPhones] that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” Trump wrote.

Trump’s post did not include details on how the proposed tariffs would be implemented.

The warning came after a White House official said Trump met with Cook at the White House earlier in the week, CBS News reported.

Treasury Secretary Scott Bessent told Fox News Friday he was not present in that meeting but suggested they may have discussed an effort by the Trump administration to focus on “precision manufacturing” of products made in the United States.

“A large part of Apple’s components are in semiconductors. So we would like to have Apple help us make the semiconductor supply chain more secure,” he said.

Most iPhone production is currently handled in China, but Foxconn, a primary assembly partner on the phones, has been exploring expanding its facilities in India.

Dan Ives, senior equity research analyst and managing director at Wedbush Securities, suggested in a post on X that manufacturing an iPhone in the United States could more than triple the cost of an iPhone 16, the latest model, from its current $1,000 price tag.

“The pressure from Trump on Apple to build iPhone production in the U.S. as we have discussed this would result in an iPhone price point that is a non-starter for Cupertino and translate into iPhone prices of [approximately] $3,500 if it was made in the U.S. which is not realistic in our view,” Ives wrote.

Apple stock was down 2.44% roughly an hour after markets opened on Friday.

The “One Big Beautiful Bill” is one big, ugly mess.

We’ve seen false advertising in naming laws before — the Democrats’ 2022 Inflation Reduction Act jumps to mind. Yet no legislation has been as misbranded as the Republican tax and spending cuts that President Trump, the branding aficionado himself, is pushing along a tortuous path in Congress.

Trump’s appeal to many Americans has always been his purported penchant for “telling it like it is.” But he’s doing the opposite by labeling as the “One Big Beautiful Bill” a behemoth that encompasses just about everything he can’t even try to do by unilateral executive orders — deeper tax cuts, more spending on the military and on his immigration crackdown and, yes, Medicaid cuts. His so-called beauty is a beast so frightening that ratings firm Moody’s saw the details last week, calculated the resulting debt and on Friday downgraded the United States’ sterling credit rating for the first time in more than 100 years. That likely means higher interest costs for the nation’s increased borrowing ahead.

And yet, in another example of the gaslighting at which Trump and his party are so adept, the White House and House Republican leaders dismissed the rebuke of their bill. Treasury Secretary Scott Bessent said it would spur economic growth — the old, discredited “tax cuts will pay for themselves” argument. Speaker Mike Johnson said the Moody’s downgrade just proved the urgent need to pass the big, beautiful bill with its “historic spending cuts.” Which only proved that Johnson didn’t read Moody’s rationale, explaining that spending cuts would be far exceeded by tax cuts, thereby reducing the government’s revenues and piling up more debt.

The Republican Party, which postures as the fiscally conservative of the two parties despite decades of evidence to the contrary, would add about $4 trillion in debt over the next 10 years if its bill becomes law, according to Moody’s. Other nonpartisan analyses — including from the Congressional Budget Office, the Committee for a Responsible Federal Budget and the Penn Wharton Budget Model of the University of Pennsylvania, similarly project additional debt in the $3-trillion-plus to $5-trillion range, more if the tax cuts are made permanent as Trump and Republicans want.

No surprise: Trump, after all, set a record for the most debt in a single presidential term: $8.4 trillion during Trump 1.0, nearly twice what accrued under his successor, President Biden. Most of Trump’s first-term red ink stemmed from his 2017 tax cuts and spending, which predated the COVID-19 pandemic and the government’s costly response.

“This bill does not add to the deficit,” White House Press Secretary Karoline Leavitt insisted to reporters on Monday, showing yet again why such a facile dissembler was chosen to speak for the habitually prevaricating president.

“That’s a joke,” Republican Rep. Thomas Massie of Kentucky responded.

Worse, it’s a lie.

And no surprise here, either, but Trump’s tariffs — another economic monstrosity that he’s declared “beautiful” — aren’t paying for this bill despite his claims. Yet the president repeated that falsehood on Tuesday (along with others), when he visited the Capitol to strong-arm Republican dissidents, including Massie, into supporting the measure ahead of a House vote. (Inside a closed caucus with House Republicans, the president reportedly called for Massie to be unseated; the Kentuckian remains opposed.)

“The economy is doing great, the stock market is higher now than when I came to office. And we’ve taken in hundreds of billions of dollars in tariff money,” Trump told reporters at the Capitol. Every point a lie.

(This week provided yet more evidence that he’s utterly wrong to keep insisting that foreign countries pay his tariffs, not American consumers. After Walmart, the largest U.S. retailer, said late last week that it would have to raise prices, Trump posted that it should “ ‘EAT THE TARIFFS.’ ” He added: “I’ll be watching, and so will your customers!!!” This after a Walmart exec said that “the magnitude of these increases is more than any retailer can absorb.”)

While details of the budget bill shift as Republican leaders dicker with their dissidents, here’s the ugly general outline, according to Penn Wharton:

Extending and expanding Trump’s 2017 tax cuts, which otherwise expire this year, would cost nearly $4.5 trillion over 10 years, $5.8 trillion if the cuts are permanent. (Mandating that tax cuts expire after a time, as Trump did in 2017, is an old budget gimmick to understate a bill’s cost. The politicians know they’ll just extend the tax breaks, as we’re seeing now.) The bill’s proposed spending increases for the military, immigration enforcement and deportations would cost about $600 billion more.

Spending cuts over 10 years, mostly to Medicaid as well as to Obamacare, food stamps and clean-energy programs, would save about $1.6 trillion. That offsets as little as one-quarter of the cost of Trump’s tax cuts and added spending.

Also, the bill is inequitable. The tax cuts would disproportionately favor corporations and wealthy Americans. Its spending cuts, however, would mostly cost lower- and some middle-income people who benefit from federal health and nutrition programs. Changes to Medicaid, including a work requirement (92% of recipients under 65 already work full or part-time, according to the health research organization KFF), and to Obamacare would leave up to 14 million people without health insurance.

Penn Wharton found that people with household income less than $51,000, for example, would see their after-tax income reduced if the bill becomes law, and the top 0.1% of income-earners would get hundreds of thousands of dollars more over the next 10 years. Beyond that time, Penn Wharton projected, “all future households are worse off” given the long-term impact of spiraling debt and a tattered safety net.

“Don’t f— around with Medicaid,” Trump told Republicans at the Capitol, according to numerous reports. How cynical, given that he was pressuring them to vote for a bill that would do just that.

All of which recalls an acronym that’s popular these days: FAFO.

@jackiekcalmes

SEOUL, May 20 (UPI) — South Korea sent a delegation to Washington to hold a second round of technical discussions this week over the Trump administration’s proposed “reciprocal” tariffs, Seoul’s Trade Ministry said Tuesday, with both sides aiming to reach an agreement by July.

A South Korean delegation led by senior ministry official Jang Sung-gil will visit Washington for talks slated to run from Tuesday through Thursday, the Trade Ministry said.

Discussions will be centered on the six areas of trade balance, non-tariff measures, economic security, digital trade, country of origin of products and commercial considerations, the ministry said. The agenda was set during a meeting held on the sidelines of last week’s Asia-Pacific Economic Cooperation trade ministers’ meeting, held on South Korea’s southern resort island of Jeju.

“Through this technology consultation, we will respond from the perspective of prioritizing national interests in order to derive the direction of a mutually beneficial agreement centered on the areas that both sides have discussed so far,” Jang said.

This week’s discussions follow a first round of working-level talks held May 1 in Washington.

South Korea is facing 25% tariffs threatened by U.S. President Donald Trump as part of his sweeping package of “Liberation Day” trade measures. Trump announced the tariffs on April 2 but quickly put their implementation on hold for 90 days. Tariffs on steel and automobiles, two key South Korean industries, are already in place.

Seoul and Washington agreed to work toward a “package” deal on trade and other related issues before July 8, when the 90-day pause on tariffs is set to expire, South Korean Trade Minister Ahn Duk-geun said in April.

The uncertain trade environment has shaken the export-dependent Asian powerhouse, which saw its economy unexpectedly shrink in the first quarter of the year.

Last month, the International Monetary Fund sharply cut its forecast for South Korea’s 2025 economic growth as part of an overall global decline reflecting “effective tariff rates at levels not seen in a century and a highly unpredictable environment.”

The April edition of the IMF’s quarterly World Economic Outlook projected 1% growth for Asia’s fourth-largest economy, down from a 2% forecast in its previous edition.

South Korea is looking to get a reduction or exemption from the American tariffs, Trade Minister Ahn Duk-geun said Friday after he met with U.S. Trade Representative Jamieson Greer at the APEC event in Jeju.

“In Friday’s meeting, we tried to raise awareness that South Korea has a bilateral free trade agreement with the United States, unlike some other countries, and has expanded trade and investment with the U.S. under the FTA,” Ahn told reporters at a press briefing.

“We are continuing to request exemption from all reciprocal tariffs and item tariffs against us,” Ahn added in a statement. “Our government will actively consult with the United States to establish a mutually beneficial solution by prioritizing national interests.”

SEOUL — In South Korea, the Trump administration’s 25% tariff on imported cars has sent local automakers Hyundai and Kia scrambling to protect one of the country’s most valuable exports. But General Motors, which last year shipped 418,782 units from its factories here to American consumers — or 88.5% of its total sales — may be facing a much larger predicament.

Unlike Hyundai and Kia, which control over 90% of the domestic market here, the Detroit-based automaker produces budget SUVs like the Chevrolet Trax or Chevrolet Trailblazer almost exclusively for the U.S. market. The Trax has been South Korea’s most-exported car since 2023.

That business model has made GM, which operates three factories and employs some 11,000 workers in the country, uniquely exposed to Trump’s auto tariffs, resurfacing long-running concerns in the local automobile industry that the company may ultimately pack up and leave.

Until last month’s tariffs, cars sold between the U.S. and South Korea were untaxed under a bilateral free trade agreement. That helped South Korea become the third-largest automobile exporter to the U.S. last year to the tune of $34.7 billion — or around half of its total automobile exports. In contrast, South Korea bought just $2.1 billion worth of cars from the U.S.

Earlier this month, GM executives estimated that the tariffs would cost the company up to $5 billion this year, adding that the company would boost production in its U.S. plants to offset the hit. With additional factories in Mexico and Canada, GM currently imports around half of the cars that it sells in the U.S.

“If the U.S. tariffs remain in place, GM will no longer have any reason to stay in South Korea,” said Lee Ho-guen, an automotive engineering professor at Daeduk University.

“The tariffs may add up to $10,000 to the sticker price on cars shipped to the U.S., while GM sells less than 50,000 units a year in South Korea. There is very little room for them to adjust their strategy.”

Kim Woong-heon, an official in GM Korea’s labor union, said that the union is approaching current rumors of the company’s potential exit with a dose of caution, but added that broader concerns about the company’s long-term commitment remain.

“The cars we’re manufacturing here are on the lowest end of GM’s price range so labor costs will make it impossible to immediately shift production to the U.S.,” he said.

“But we have painful memories of GM shutting down one of its factories in 2018, so we get nervous every time these rumors surface.”

GM Chevrolet automobiles bound for export sit parked at the Port of Incheon in South Korea.

(SeongJoon Cho / Bloomberg via Getty Images)

This isn’t the first time that GM’s prospects in the country have come under question. The company first established itself in South Korea in 2002 by acquiring the bankrupt Daewoo Motor Co. in a government-backed deal that some at the time criticized as “GM taking the cream off Daewoo for almost nothing.”

Struggling to compete with the likes of Hyundai, GM briefly positioned itself as a production base for European and Asian markets until its bankruptcy in 2009.

Amid the global restructuring efforts that followed, concerns that it would close its South Korean operations led the government to once again intervene. In the end, GM stayed after receiving $750 million in financing from the country’s development bank on the condition that it would remain open for at least 10 more years.

But in 2018, the company closed its factory in the city of Gunsan, which had employed around 1,800 workers, and spun off its research and development unit from its manufacturing base — a move that many saw as the company strategically placing one foot out the door.

In February, shortly after President Trump announced the 25% tariffs on foreign-made cars, Paul Jacobson, GM’s chief financial officer, hinted that the company may once again be facing similarly tough decisions:

“If they become permanent, then there’s a whole bunch of different things that you have to think about in terms of, where do you allocate plants, and do you move plants.”

In recent weeks, executives from GM Korea have sought to assuage the rumors that the company’s South Korean operations would be affected.

“We do not intend to respond to rumors about the company’s exit from Korea,” said Gustavo Colossi, GM Korea’s vice president of sales, at a news conference last month. “We plan to move forward with our sales strategies in Korea and continue launching new models in the coming weeks and months, introducing fresh GM offerings to the market.”

The union says the company’s two finished car plants have been running at full capacity, with an additional 21,000 units recently allocated to the factory in Incheon, a city off the country’s western coast — a sign that business will go on as usual for now.

But with GM’s 10-year guarantee set to expire in 2027, Kim, the union official, said that their demands for measures that prove the company’s commitment beyond that have gone unanswered.

These include manufacturing GM’s electric and plug-in hybrid vehicles in South Korean factories, as well as making a greater range of its products available for sale in South Korea and other Asian markets.

”If the company intends to continue its operations here, it needs to make its business model more sustainable and not as reliant on imports to the U.S.,” Kim said.

“That will be our core demand at this year’s wage and collective bargaining negotiations.”

GM’s immediate prospects in the country will depend on the ongoing tariff talks between U.S. and South Korean officials that began last month with the goal of producing a deal by July 8.

Although South Korean trade minister Ahn Duk-geun has stressed that cars are “the most important part of the U.S.-South Korea trade relationship,” few expect that Seoul will be able to finesse the sort of deal given to the U.K., which last week secured a 10% rate on the first 100,000 vehicles shipped to the U.S. each year.

Unlike South Korea, which posted a $66-billion trade surplus with the U.S. last year, the U.K. buys more from the U.S. than it sells. And many of the cars that it does sell to the U.S. are luxury vehicles such as the Rolls-Royce, which Trump has differentiated from the “monster car companies” that make “millions of cars.”

“At some point after the next two years, I believe it’s highly likely GM will leave and keep only their research and development unit here, or at least significantly cut back on their production,” Lee, the automotive professor, said.

In the southeastern port city of Changwon, home to the smaller of GM’s two finished car plants, local officials have been reluctant to give air to what they describe as premature fearmongering.

But Woo Choon-ae, a 62-year-old real estate agent whose clients also include GM workers and their families, can’t help but worry.

She says that the company’s exit would be devastating to the city, which, like many rural areas, has already been under strain from population decline.

GM employs 2,800 workers in the region, but accounts for thousands more jobs at its suppliers. The Changwon factory, which manufactures the Trax, represented around 15% of the city’s total exports last year.

“People work for GM because it offers stable employment until retirement age. If they close the factory here, all of these workers will leave to find work in other cities, which will be a critical blow to the housing market,” she said.

“Homes are how people save money in South Korea. But if people’s savings are suddenly halved, who’s going to be spending money on things like dining out?”

California is facing an additional $12-billion state budget shortfall next year, a deficit largely caused by overspending and that Gov. Gavin Newsom said was made worse by President Trump’s federal tariff policy.

“California is under assault,” Newsom said. “The United States of America, in many respects, is under assault because we have a president that’s been reckless.”

Newsom unveiled the forecast during a presentation Wednesday of his $321.9-billion revised spending plan that proposes walking back free healthcare for low-income undocumented immigrants, eliminating Medi-Cal benefits for expensive weight loss treatments and cutting back overtime hours for in-home supportive service workers, among dozens of other trims.

The new deficit comes in addition to $27.3 billion in fiscal remedies, including $16.1 billion in cuts and a $7.1-billion withdrawal from the state’s rainy day fund, that lawmakers and the governor already agreed to make in 2025-26.

The overall $39-billion shortfall marks the third year in a row that Newsom and lawmakers have been forced to reduce funding for state programs after dedicating more money than California has available to spend.

Newsom’s proposed cuts

Among the new cuts Newsom put on the table Wednesday is a call to cut back on his signature policy to provide free healthcare coverage to income-eligible undocumented immigrants.

Newsom is proposing freezing new Medi-Cal enrollment for undocumented adult immigrants as of Jan. 1 and requiring those over 18 to pay $100 monthly premiums to receive healthcare coverage through Medi-Cal.

The cost share will reduce the financial burden on the state and could lower the total number of people enrolled in the healthcare program if some immigrants cannot afford the new premiums. Freezing enrollment may prevent the price tag of the program from continuing to balloon after more people signed up for coverage than the state anticipated.

The changes offer minor savings of $116.5 million next year, with savings growing to $5.4 billion in 2028-29.

The governor is also following the federal government’s lead and cutting $85 million in benefits for Ozempic and other popular weight loss medications from all Medi-Cal coverage plans, while saving $333.3 million by eliminating long-term care benefits for some enrollees.

Newsom wants to cap overtime hours for in-home support service workers, according to his budget, to save $707.5 million next year.

The governor’s budget includes a controversial proposal to grab $1.3 billion in funding in 2025-26 from Proposition 35, a measure voters approved in November that dedicated the revenue from a tax on managed care organizations to primarily pay for increases to Medi-Cal provider rates. The decision is expected to draw pushback from a coalition of doctors, clinics, hospitals and other healthcare groups that supported the proposition, which nearly 68% of voters backed.

Under another cost-saving measure, the governor wants to shift $1.5 billion in funding for Cal Fire from the general fund. Instead, Newsom wants to provide that $1.5 billion from the greenhouse gas reduction fund paid for by proceeds of the state cap-and-trade program next year.

The governor’s budget proposes extending the cap-and-trade program — a first-of-its-kind initiative that sets limits on companies’ greenhouse gas emissions and allows them to buy additional credits at auction from the state, and he wants to dedicate at least $1 billion each year to high speed rail.

A spending deficit

The budget marks a continuation of years of overspending in California under the Newsom administration.

After predicting a lofty $100-billion surplus from federal COVID-19 stimulus funding and the resulting economic gains three years ago, Democrats have not reduced spending to match up with a return to normal after the pandemic.

Poor projections, the ballooning cost of Democratic policy promises and a reluctance to make long-term sweeping cuts have added to the deficit at a time when the governor regularly touts California’s place as the fourth largest economy in the world.

State revenues have exceeded expectations since April, but so has state spending.

Despite the shortfall, California has more money to spend than in the prior budget approved in June, and the governor and lawmakers still plan to take $7.1 billion from the state’s rainy day fund to cover the total 2025-26 deficit.

A “Trump Slump”

Though personal income tax and corporate tax receipts in the state came in $6.8 billion above projections through April, Newsom is predicting that overall revenues will be $16 billion lower than they could have been from January 2025 through June 2026 because of the economic impact of Trump’s tariffs.

The governor originally released the new information, which his team dubbed the “Trump Slump,” on the eve of the presentation of his revised 2025-26 state budget plan, seeking to blame the president for California’s expected revenue shortfall.

Trump in April implemented a series of tariffs on all imported goods, higher taxes on products from Mexico, Canada and China, and specific levies on products and materials such as autos and aluminum. The president has backed down from some of his tariffs, but Newsom alleges that the policies and economic uncertainty will lead to higher unemployment, inflation, lower GDP projections and less capital gains revenue for California.

California filed a lawsuit last month arguing that Trump lacks the authority to impose tariffs on his own. On Tuesday, the state said it will seek a preliminary injunction to freeze the tariffs in federal court.

On Monday, the United States and China reached an agreement to slash sky-high tariffs for 90 days. Though both sides claimed they could withstand a long trade war, they reached a truce quicker than many analysts expected.

The breakthrough marked a dramatic ratcheting down of trade tensions following the tariff war launched by US President Donald Trump during his “liberation day” announcement on April 2.

Trump initially unveiled so-called reciprocal tariffs on dozens of countries before pausing them just one week later. China, however, did not get off the hook and Beijing soon retaliated with tariffs of its own.

Tit-for-tat exchanges quickly snowballed into eye-watering sums. By April 11, tariffs on Chinese goods entering the US had reached 145 percent and levies on US products going to China had swelled to 125 percent.

Tensions were already at boiling point last weekend when US Treasury Secretary Scott Bessent and He Lifeng, China’s vice-premier, agreed a ceasefire that would slash respective tariffs by 115 percentage points for three months.

US duties on Chinese products will now fall to 30 percent, while China’s tariffs on US goods will drop to 10 percent. Stock Markets rallied on the news, with the Nasdaq Composite climbing 4.3 percent on Monday and gaining 20 percent over its April low.

But one key question has significant implications for trade talks to come: Did Washington or Beijing flinch first?

What did the two countries say?

The tariff suspension, which was sharper than analysts expected, came after two days of trade talks in Geneva, Switzerland. On Monday, the US and China released a joint statement announcing the deal.

The two countries acknowledged the importance of their “bilateral economic and trade relationship” as well as the importance of a “sustainable, long-term, and mutually beneficial economic and trade relationship”.

The US and China agreed to establish a mechanism to continue discussing trade relations. China also agreed to “suspend or cancel” non-tariff measures against the US, but did not provide any details.

Speaking to reporters in Geneva last weekend, China’s Vice Premier He described the talks as “candid, in-depth and constructive”.

For his part, US Treasury Secretary Bessent told Bloomberg Television on Monday that “both sides agree we do not want a generalised decoupling.”

“The US is going to do a strategic decoupling in terms of the items that we discovered during COVID were of national security interests – whether it’s semiconductors, medicine, steel,” Bessent said.

After the talks concluded, Trump praised negotiations as a “great trade deal”, adding “we’re not looking to hurt China.” He then claimed a personal win, saying he had engineered a “total reset” with Beijing.

Elsewhere, Hu Xijin, former editor of the Chinese state-run Global Times publication, said on social media that the deal was “a great victory for China”.

What are the terms of the pause?

After the tariff pause had been announced, Bessent said it’s “implausible” that reciprocal tariffs on China will fall below 10 percent. However, he said the April 2 level – set by President Trump at 34 percent – “would be a ceiling”.

He also said “we could see some amount of the fentanyl tariffs… come off.” Earlier this year, Trump put a 20 percent tariff on China, accusing it of not doing enough to stop the flow of fentanyl, a highly addictive and deadly opioid, into the US.

For now, Chinese goods will continue face a 30 percent tariff. In addition, specific products from China, such as electric vehicles, steel and aluminium, are subject to even higher, separate tariffs imposed in recent years.

On Monday, the White House also issued an executive order lowering duties on low-value packages – items costing up to $800 – from China from 120 to 54 percent.

And while a minimum $100 fee on packages from e-commerce sites Temu and Shein will remain in place, the increase to $200 planned for June 1 was dropped.

On the flip side, Beijing pledged to suspend non-tariff forms of retaliation imposed since April 2, such as export restrictions on critical minerals that US manufacturers use in high-tech equipment and clean energy technology.

Notably, the deal does not include concessions from Beijing on several US sticking points, like its huge trade surplus with the US or its exchange rate policy, China is accused of keeping its renminbi artificially low in order to boost export sales.

Tariff suspensions will be in place for 90 days. They will be subject to reviews based on broad negotiations in the coming weeks and months.

Who conceded more ground?

The speed with which the US and China unwound their tariffs, taking many analysts by surprise, suggests the trade war was inflicting pain on both sides.

The tariffs were threatening job losses for Chinese factory workers and higher inflation and empty shelves for American consumers.

But for Piergiuseppe Fortunato, an adjunct professor of economics at the University of Neuchatel in Switzerland, it is clear who wanted the deal more badly.

“First of all, America made more concessions than China. Second, America’s economy, which is unsteady at the moment, is more reliant on China’s than the other way around.”

In April, the International Monetary Fund (IMF) warned that the US economy was facing an increased risk of recession as Trump’s trade war – and the accompanying increase in consumer prices – could unleash a “significant slowdown”.

Fortunato told Al Jazeera that “Beijing is not in such a precarious position. Take, for example, its latest export figures.”

China’s exports grew sharply in April. The strong performance, an 8.2 percent increase from the year before, came as Chinese firms diverted trade flows to Southeast Asia, Europe and other destinations.

“I think that Washington overplayed its hand with Beijing,” says Fortunato.

“The White House overestimated the importance of the US market, and underestimated China’s success in diversifying its exports away from the US since the first Trump trade war” in 2018.

What will happen next?

“It could take a long time to reach a detailed agreement, if one is even possible,” notes Fortunato.

In 2018, the US backed away from a potential trade deal following talks with Beijing. The next 18 months saw tariff exchanges before a Phase One deal was signed in January 2020.

However, China did not meet all the terms of that purchase agreement. It fell some 43 percent short of the $200bn worth of goods it agreed to buy from the US by 2021.

Then, the US trade deficit with China jumped up during the COVID-19 pandemic, setting the stage for the current trade war.

Earlier this week, Bessent once again hinted that Washington might be looking for the type of “purchase agreements” that characterised the Phase One deal.

“The US has made noises that it may be going for more purchase agreements. But the American economy took a hit last time from similar arrangements,” says Fortunato.

During Trump’s first trade war with China, the US-China Business Council estimated that 245,000 US jobs were lost.

As the scope of tariffs is greater today, even after last weekend’s announcement, it’s fair to assume that even more jobs will be shed.

In the future, Fortunato suspects the US will “land at an average tariff rate of 15-20 percent, and even higher for China. That’s five times greater than what it was in January… a massive change.”

SACRAMENTO — Gov. Gavin Newsom’s Office said Tuesday that President Trump’s tariff policies will reduce state revenues in California by $16 billion through next year.

Despite personal income tax and corporate tax receipts in the state coming in $6.8 billion above projections through April, the Newsom administration is predicting that overall revenues will be lower than they could have been from January 2025 through June 2026 because of the economic impact of Trump’s tariffs.

The governor released the new information, which his team dubbed the “Trump Slump,” on the eve of the presentation of his revised 2025-26 state budget plan, seeking to blame the president for California’s expected revenue shortfall. His office has not released any additional figures about the state budget.

Newsom is expected on Wednesday to project a deficit for California in the year ahead with Medi-Cal costs exceeding expectations, including his signature policy to provide free healthcare coverage to low-income undocumented immigrants. The new shortfall comes in addition to $27.3 billion in financial remedies, including $16.1 billion in cuts and a $7.1 billion withdrawal from the state’s rainy day fund, that lawmakers and the governor already agreed to make in 2025-26.

The deficit marks the third year in a row that Newsom and lawmakers have been forced to reduce spending after dedicating more money to programs than the state has available to spend. Poor projections, the ballooning cost of Democratic policy promises and a reluctance to make long-term sweeping cuts have added to the deficit at a time when the governor regularly touts California’s place as the fourth largest economy in the world.

Trump implemented a series of tariffs on all imported goods, higher taxes on products from goods from Mexico, Canada and China, and specific levies on products and materials such as autos and aluminum, in April. The president has backed down from some of his tariffs, but Newsom alleges that the policies and economic uncertainty will lead to higher unemployment, inflation, lower GDP projections and less capital gains revenue for California.

California filed a lawsuit last month arguing that Trump lacks the authority to impose tariffs on his own. On Tuesday, the state said it will seek a preliminary injunction to freeze the tariffs in federal court.

The world’s two biggest economies have stepped back from the brink.

After imposing retaliatory tariff hikes at rates never seen before, the United States and China have agreed to a truce.

US taxes on Chinese goods will now fall from 145 percent to 30 percent, and China will cut theirs on US items from 125 percent to 10 percent.

Some of the levies have been scrapped altogether while others have been put on hold.

After weeks of considerable strain, many people are looking to see how global supply chains will be affected.

Is it the end of the global trade war, triggered last month by US President Donald Trump?

And what does it mean for those countries who had been anticipating big investments due to the steep duties on China?

Presenter: Elizabeth Puranam

Guests:

William Lee, chief economist, Milken Institute

Huiyao Wang, founder, Center for China and Globalization

Jayant Menon, former lead economist, Asian Development Bank

So-called Hollywood ambassadors Jon Voight and Sylvester Stallone joined with a coalition of entertainment industry groups for a letter delivered this week to President Trump urging him to support tax measures and a federal tax incentive that would help bring film and TV production back to the U.S.

The letter is signed by Voight, Stallone, all the major Hollywood unions and trade groups such as the Motion Picture Assn., the Producers Guild of America and the Independent Film & Television Alliance, indicating widespread support from the entertainment industry.

“Returning more production to the United States will require a national approach and broad-based policy solutions … as well as longer term initiatives such as implementing a federal film and television tax incentive,” the letter states.

In the letter, which was obtained by The Times, the groups say they support Trump’s proposal to create a new 15% corporate tax rate for domestic manufacturing activities that would use a provision from the old Section 199 of the federal tax code as a model.

Under the previous Section 199, which expired in 2017, film and TV productions that were made in the U.S. qualified as domestic manufacturing and were eligible for that tax deduction, the letter states.

The letter also asks Trump to extend Section 181 of the federal tax code and increase the caps on tax-deductible qualified film and TV production expenditures, as well as reinstating the ability to carry back losses, which the groups say would give production companies more financial stability.

The tax measures — particularly Sections 199 and 181 — are issues the entertainment industry has long advocated for, according to two people familiar with the matter who were not authorized to comment publicly. The letter itself came together over the weekend, they said. It was intended to present different measures that shared the same goal of increasing domestic production, one person said.

“Everything we can do to help producers mange their budgets is important,” said Susan Sprung, chief executive of the Producers Guild of America. “In an ideal world, we’d want a federal tax incentive, in addition to these tax provisions, but we want to advocate to make it as easy as possible to produce in the United States and make it as cost-effective as possible.”

Last week, Trump threw the entertainment industry into chaos after initially suggesting a 100% tariff on films made in other countries. Then, California Gov. Gavin Newsom jumped into the mix, calling for a $7.5-billion federal tax incentive to keep more productions in the U.S.

The proposals on the federal level come as states are upping their own film and TV tax credits to better compete against each other and other countries. Late last week, New York Gov. Kathy Hochul signed the state’s budget, which increased the cap for its film tax credit to $800 million a year, up from $700 million.

The expanded tax incentive program allocates $100 million for independent studios and gives additional incentives to companies that produce two or more projects in New York and commit to at least $100 million in qualified spending.

The program was also extended through 2036, which could help attract TV producers, who often want to know that their filming location is committed if they’re embarking on a series.

Production in New York has been slow, and the state needed this boost, said Michael Hackman, chief executive of Hackman Capital Partners, which owns two film and TV studio properties in the state, as well as several facilities in California. The increase from New York could also push California to increase its own film and TV tax credit program.

Last year, Newsom called to increase the annual amount allocated to California‘s film and TV tax credit program from $330 million to $750 million.

Two bills are currently going through the state legislature that would expand California’s incentive, including increasing the tax credit to cover up to 35% of qualified expenditures (or 40% in areas outside the Greater Los Angeles region), as well as expanding the types of productions that would be eligible for an incentive.

“We have the best infrastructure, the best talent, we have everything going for us,” Hackman said. “So if our state legislature can get more competitive with our tax credits, I think more productions will stay. But if they don’t, this will result in more productions continuing to leave the state and going to New York and to other locations.”

NEW YORK — American businesses that rely on Chinese goods reacted with muted relief Monday after the U.S. and China agreed to pause their exorbitant tariffs on each other’s products for 90 days.

Importers still face relatively high tariffs, however, as well as uncertainty over what will happen in the coming weeks and months. Many businesses delayed or canceled orders after President Trump last month put a 145% tariff on items made in China.

Now, they’re concerned a mad scramble to get goods onto ships will lead to bottlenecks and increased shipping costs. The temporary truce was announced as retailers and their suppliers are looking to finalize their plans and orders for the holiday shopping season.

“The timing couldn’t have been any worse with regard to placing orders, so turning on a dime to pick back up with customers and our factories will put us severely behind schedule,” said WS Game Company owner Jonathan Silva, whose Massachusetts business creates deluxe versions of Monopoly, Scrabble and other Hasbro board games.

Silva said the 30% tariff on Chinese imports still is a step in the right direction. He has nine containers of products waiting at factories in China and said he would work to get them exported at the lower rate.

U.S. Trade Representative Jamieson Greer said the U.S. agreed to lower its 145% tariff rate on Chinese goods by 115 percentage points, while China agreed to lower its retaliatory 125% rate on U.S. goods by the same amount. The two sides plan to continue negotiations on a longer-term trade deal.

National Retail Federation President and CEO Matthew Shay said the move was a “critical first step to provide some short-term relief for retailers and other businesses that are in the midst of ordering merchandise for the winter holiday season.”

The news sent the stock market and the value of the dollar soaring, a lift that eluded business owners confronting another dizzying shift.

Marc Rosenberg, founder and CEO of Edge Desk in Deerfield, Ill., invested millions of dollars to develop a line of $1,000 ergonomic chairs but delayed production in China that was set to begin this month, hoping for a tariff reprieve.

Rosenberg said it was good U.S.-China trade talks were ongoing but that he thinks the 90-day window is “beyond dangerous” since shipping delays could result in his chairs still being en route when the temporary deal ends.

“There needs to be a plan in place that lasts a year or two so people can plan against it,” he said.

Jeremy Rice, the co-owner of a Lexington, Kentucky, home-décor shop that specializes in artificial flower arrangements, said the limited pause makes him unsure how to approach pricing. About 90% of the flowers House uses are made in China. He stocked up on inventory and then paused shipments in April.

“Our vendors are still kind of running around juggling, not knowing what they’re gonna do,” Rice said. “We ordered in what we could pre-tariff and so there’s stock here, but we’re getting to the point now where there’s things that are gone and we’re going to have to figure out how we’re gonna approach it.”

“There’s no relief,” he added. “It’s just kind of like you’re just waiting for the next shoe to drop.”

Before Trump started the latest U.S. tariff battle with China, Miami-based game company All Things Equal was preparing to launch its first electronic board game. Founder Eric Poses said he spent two years developing “And the Good News Is,” a fill-in-the-blank game covering topics like politics and sports. He plowed $120,000 into research and development.

When the president in February added a 20% tariff on products made in China, Poses started removing unessential features such as embossed packaging. When the rate went up to 145%, he faced two options: leave the goods in China or send them to bonded warehouses, a storage method which allow importers to defer duty payments for up to five years.

Poses contacted his factories in China on Monday to arrange the deferred shipments, but with his games still subject to a 30% tariff, he said he would have to cut back on marketing to keep the electronic game priced at $29.99. With other businesses also in a rush to get their products, he said he is worried he won’t be able to his into shipping containers and that if he does, the cost will be much more expensive.

“It’s very hard to plan because if you want to go back to production in a couple of months, then you’re worried about what will the tariff rate be when it hits the U.S. ports after that 90-day period,” Poses said.

Jim Umlauf’s business, 4Knines, based in Oklahoma City, makes vehicle seat covers and cargo liners for dog owners and others. He imports raw materials such as fabric, coatings and components from China.

Umlauf said that even with a lower general tariff rate, it’s hard for small businesses to make a profit. He thinks the U.S. government should offer small business exclusions from the tariffs.

“I appreciate any progress being made on the tariff front, but unfortunately, we’re still far from a real solution — especially for small businesses like mine,” Umlauf said. “When tariffs exceed 50%, there’s virtually no profit left unless we dramatically raise prices — an option that risks alienating customers.”

Zou Guoqing, a Chinese exporter who supplies molds and parts to a snow-bike factory in Nebraska as well as fishing and hunting goods to a U.S. retailer in Texas, also thinks the remaining 30% tariff is too high to take comfort in.

With the possibility Washington and Beijing will negotiate over the 20% tariff Trump imposed due to what he described as China’s failure to stem the flow of fentanyl, Zou said he would wait until the end of May to decide when to resume shipments to the U.S.

Silva, of WS Game Company, said he planned to begin placing his holiday season orders this week but won’t be as bold as he might have been if the ultra-high tariff had been suspended for more than 90 day.

“We will order enough to get by and satisfy the demand we know will be there at the increased pricing needed, but until we get a solid foundation of a long-term agreement, the risks are still too high to be aggressive.”

Anderson and D’Innocenzio write for the Associated Press.

WASHINGTON — China and the United States retreated from an emerging economic crisis on Monday, agreeing to drastically reduce tariffs on one another for the next 90 days as they continue to negotiate a more permanent trade deal, providing welcome news for investors and retailers who increasingly feared a breakthrough was out of reach.

The temporary truce will see the United States lower tariffs on Chinese imports to 30% from 145%, and China reduce its import duties on U.S. goods to 10% from 125%, starting Wednesday. Wall Street rejoiced at the announcement of a deal, with the Dow Jones industrial average, the Standard & Poor’s 500 and the Nasdaq all up more than 2%.

Trump referred to the development as a “total reset with China.” But the end result of the provisional agreement is a return to tariff rates that were in place before the president launched a global trade war on April 2, in what he called “Liberation Day” — a move that brought the largest decline in commercial shipping traffic since the COVID-19 pandemic and prompted financial institutions to warn of an imminent recession.

Supply shortages and price increases on Chinese products may still hit American consumers in the coming weeks, a lingering effect of weeks of uncertainty, experts said. Many retailers have already increased their prices. And shipping costs are expected to skyrocket as manufacturers and wholesalers attempt to make up for lost time. The 90-day deadline for a more lasting trade deal could fuel further market volatility in the coming weeks.

Trump’s Treasury secretary, Scott Bessent, who led the negotiations with Beijing, also secured a commitment from China to cut non-tariff barriers it had put in place after April 2, including certain import restrictions and blacklisting of U.S. companies.

“It de-escalates trade tensions and reduces the probability of a stagflation,” said Sung Won Sohn, a former commissioner at the Port of Los Angeles, referring to a phenomenon feared the world over by economists: a combination of slow economic growth, high inflation and increasing unemployment. “But this is a temporary truce. A tough road is ahead of us.”

Over the next three months, the Trump administration says it intends to develop a “mechanism” that will “rebalance” the U.S. trade relationship with China — a task that has eluded presidents for decades. Trump hopes to change Beijing’s policy of providing government subsidies to state-owned enterprises and to reduce a $400-billion U.S. trade deficit with China, both tall orders in such a short time frame.

“Supply chains have been disrupted and there are a lot fewer ships sailing the ocean,” Sohn added. “Supplies in stores won’t be as plentiful as it used to be. During the back-to-school season, for example, there will be shortages, stockouts and higher prices. If the negotiation progresses well, there will be more merchandise at retail stores for back-to-school and Christmas.”

After the deal concluded in Geneva, Bessent said he would draw inspiration in the upcoming talks from a preliminary agreement negotiated with Beijing at the end of the first Trump administration called Phase One, which included new rules governing the exchange of intellectual property, technology transfer and financial services. Bessent claimed that deal was not enforced by the Biden administration.

But the Treasury secretary acknowledged that the upcoming talks would be difficult. “Neither side wants a decoupling,” he said.

“I don’t think anything’s going to be easy, because this has been going on for a long time,” Bessent told CNBC.

Before departing for an official visit to the Middle East, Trump said he expected to speak with Chinese President Xi Jinping and praised the agreement as a temporary step toward a permanent deal. The truce, Trump added, does not include tariffs on cars, steel and aluminum.

He also spoke with Apple Chief Executive Tim Cook shortly after announcing the deal, Trump said.

“The relationship is very good. We’re not looking to hurt China — China was being hurt very badly,” the president told reporters at the White House. “They were very happy to be able to do something with us.”

Trump said that pharmaceuticals may also be exempt from tariff reductions with China going forward, speaking at a signing ceremony for an executive order aimed at lowering drug prices.

The majority of the world’s pharmaceuticals are manufactured in China and India. But Trump reserved his harshest critique at the event for the European Union, which produces several high-profile drugs, including Ozempic and Wegovy, weight loss medications that Trump said are heavily overpriced in the United States.

“The European Union is in many ways nastier than China,” Trump said, adding: “We’ve just started with them.”

“We have all the cards,” he said. “They treated us very unfairly.”

May 12 (UPI) — President Donald Trump‘s announcement that he wishes to place tariffs on internationally-produced films has people in the movie business worrying of another hurdle.

Trump announced his intention to implement 100% tariffs on foreign films on May 4 after meeting with actor Jon Voight. Trump has not shared details about how his tariff plan would work. Daniel Loria, senior vice president of The BoxOffice Company, told UPI the first and most difficult task will be defining what a foreign-made film is.

“Is a movie written in the U.S. for a U.S. studio, funded by a U.S. production company set in a foreign country that then comes back and does all the effects and post-production work and marketing here — because the story elements include a foreign angle, does that count as a foreign-made film?” Loria said.

“Ultimately determining what is and isn’t foreign produced, which is a difficult task to enact in a globalized economy and industry, is going to be essential to how film studios tackle this proposed era that is coming up.”

Unlike an automotive manufacturer that imports tangible products into the United States, filmmaking is far more speculative. Films are less a good or product and more an experience, Loria said.

“You’re buying the experience,” he said. “Putting a tariff on movies would be very difficult to trickle down to the moviegoer. You have to think about movie-going as a service, not a good.”

The United States has not placed tariffs on films before. American films are not subject to tariffs in other countries when they hit their theaters either. Physical media such as DVDs and Blu-rays are subject to tariffs in some cases. Other countries, such as China, may require American films to be altered to meet content guidelines.

Hollywood is recognized as the epicenter of the film world but it has increasingly become a global industry. The highest-grossing film in the world this year is the Chinese animated film Ne Zha 2. As of Friday, it has earned more than double that of the second-place film, A Minecraft Movie, reaching $1.8 billion in the worldwide box office, according to Box Office Mojo.

Box office data combines the United States and Canada’s earnings — referred to as the domestic box office — in comparison to the worldwide box office. According to Loria’s data, the domestic box office represented 21% of global sales in 2021, 29% in 2022, 27% in 2023 and about 30% in 2024.

Loria noted that while box office earnings and publicly known production costs are often cited to gauge the success of a film, it is difficult to determine which films are profitable or how profitable the business is as a whole.

“A lot of Hollywood accountants would tell you no films make money,” Loria said.

Box office numbers suggest that the industry is still recovering from the COVID-19 pandemic. The pandemic halted productions around the world and closed theaters in the United States for more than a year. This came after a record year at the box office in 2019.

Shannon Cole is the executive director of the Vermillion Cultural Association based in Vermillion, S.D. The nonprofit organization leads art programming for the city and owns and operates the Coyote Twin Theater. It is the only theater within a 25-mile radius of the town and plays many of the biggest new releases.

Cole told UPI that the announcement of film tariffs combined with other Trump administration policies — specifically cuts to the National Endowment for the Arts and National Endowment for the Humanities — has her, other local arts leaders and local artists worried about how long they can continue doing their work.

“It means we’re looking at at least three more years of what’s already been a four-year downturn in the film industry,” Cole said. “Everyone is out of the habit of going to the movies. Now, you’re saying potentially movies could end up costing more because studios will charge theaters more to show movies?”

According to Cole, the Coyote Twin Theater’s audience was down by 40% from 2023 to 2024. The theater pays as much as 68% of ticket prices back to the studios for showing their movies, and for-profit theaters may pay more.

“2019 by far was the high watermark of the movie industry worldwide,” Cole said. “It was the best year on record for us. Everybody wants to get back to that.”

Jason Squire, professor emeritus at the University of Southern California School of Cinematic Arts and host of The Movie Business Podcast, told UPI that the business is largely far different than the perception of glitz and glamour that is often attached to it.

“It’s a gig economy,” Squire said. “It’s people who are, in general, highly accomplished craftspeople in very specialized crafts. Many of whom are struggling because of runaway production. Because of issues of crisis within the business and the transformation that’s going on.”

Part of that transformation is the decentralization of the industry. States like Georgia, New Jersey, New Mexico and Louisiana are drawing production away from California with enticing incentives. Production incentives are not unique to the United States though.

Toronto has been growing its film production market since the 1970s, spurred on by the Ontario Film and Television Tax Credit. This 35% refundable tax credit is offered to productions that meet several criteria, including spending at least 75% of their final costs in Ontario.

India and China have surpassed the United States in terms of the number of films they produce. India offers cash rebates for qualifying production expenses.

In response to Trump’s tariff announcement, California Gov. Gavin Newsom proposed a new $7.5 billion federal film tax credit to help bring productions back to California.

“California built the film industry — and we’re ready to bring even more jobs home,” Newsom wrote on X. “We’ve proven what strong state incentives can do. Now it’s time for a real federal partnership to Make America Film Again.”

Voight, one of three advisers to Trump on Hollywood, has also drawn up a “Make Hollywood Great Again” plan that proposes incentives for domestic film production, according to Deadline. His proposals are laden with several incentives for a majority of physical production to be done in the United States.

Voight also proposed a 120% tariff if a film “could have been produced in the U.S.” but was produced elsewhere and receives a production tax incentive.

“The idea of placing a tariff on overseas tax incentives or government subsidies or rebates would be onerous,” Squire said. “It would throw a wrench in the works of the business model and make it more expensive, which is the last thing you want. The key to producing movies is to make them at a price you believe the public will bear and make a little more than you spent in order to keep making movies.”

Cinema United, formerly the National Association of Theatre Owners, released a statement on Thursday in response to the Trump administration’s interest in reforming the film industry.

“It is important to recognize that theatrical exhibition is not a Hollywood industry, but a Main Street industry, and proposals that support and promote the hard work being done by theatre owners will have a positive and meaningful impact in communities across this nation,” Michael O’Leary, president and CEO of Cinema United, said in a statement.

“We are committed to working with the administration, Congress and all interested parties who recognize and share the goal of ensuring that our local theatres retain both their economic and cultural significance and we thank them for their leadership.”

SAN JUAN, Puerto Rico — As a trade war sparked by President Trump’s tariffs stokes worry and uncertainty in the global economy, Puerto Rico sees an opportunity.

Government officials in the U.S. territory are jumping on planes to try to persuade international companies to relocate their manufacturing plants to the island, where they would be exempt from tariffs.

Any relocation would be a boost to Puerto Rico’s shaky economy as the government emerges from a historic bankruptcy and continues to struggle with chronic power outages. The island also is bracing for potentially big cuts in federal funding under the Trump administration, with federal funds accounting for more than half of Puerto Rico’s budget.

“The tariff issue is a controversial one, but for Puerto Rico, it’s a great opportunity,” said Gov. Jenniffer González.

Manufacturing remains the island’s biggest industry, representing nearly half of its gross domestic product. But the government wants to recapture Puerto Rico’s heyday, when dozens of big-name companies, especially in the pharmaceutical sector, were based here and kept the economy humming.

So far, officials have identified between 75 and 100 companies that might consider relocating operations to Puerto Rico given the ongoing trade war, said Ella Woger-Nieves, chief executive of Invest Puerto Rico, a public-private partnership that promotes the island as a business and investment destination.

The companies identified work in sectors including aerospace, pharmaceuticals and medical devices.

Officials also have welcomed site selectors to Puerto Rico and organized tours to show them the island’s infrastructure and emphasize that tariffs wouldn’t apply here.

“This is the moment to plant those seeds,” Woger-Nieves said.

She said officials with Invest Puerto Rico and various government agencies are expected to make nearly 20 more trips this year in a bid to attract more manufacturing. The government praised an executive order that Trump signed May 5 that aims to reduce the time it takes to approve construction of pharmaceutical manufacturing facilities in the U.S.

From needlework to chemicals

In the mid-1900s, needlework was one of Puerto Rico’s largest industries, employing about 7,000 workers who labored on handkerchiefs, underwear, bedspreads and other items, according to a 1934 fair competition code signed by President Franklin D. Roosevelt.

Manufacturing later shifted to chemicals, clothes and electronics. By the late 1970s, a growing number of pharmaceutical companies began moving their operations to Puerto Rico, lured by a federal tax incentive created in 1976 to help boost the island’s economic growth. However, in 1996, the U.S. government began phasing out the incentive, which had exempted the subsidiaries of U.S. companies operating in Puerto Rico from federal taxes on local profits.

From 1995 to 2005, overall manufacturing employment fell by nearly 30%, but employment in the sectors of pharmaceuticals, medicines and chemicals increased by at least 10%, according to the U.S. Bureau of Labor Statistics.

Puerto Rico continues to lead U.S. exports of pharmaceutical and medicine manufacturing, representing nearly 20% of total U.S. exports in 2020, according to the bureau.

In 2024, the island exported nearly $25 billion worth of goods, including $11 billion in vaccines and certain cultures; $7 billion worth of packaged medicaments; $1 billion in hormones; $984 million in orthopedic items; and $625 million worth of medical instruments, according to the Observatory of Economic Complexity.

Sergio Marxuach, policy director and general counsel for the Center for a New Economy, a nonprofit, nonpartisan think tank, said the push to attract more companies makes sense, especially recruiting those in the pharmaceutical and medical device sectors.

“If I were advising the government, begin there, because you already have a footprint,” he said.

Marxuach noted that outside of those areas, Puerto Rico could have an advantage when it comes to national defense and security contracts, including the manufacturing of drones or underwater surveillance systems.

“They need a place to manufacture in scale,” he said, adding that doing so in a U.S. jurisdiction is key.

Puerto Rico’s government also is meeting with university officials to potentially change curriculums if needed to ensure students are graduating with the skills required by companies.

The Achilles’ heel

Puerto Rico touts its U.S. jurisdiction, tax incentives and skilled workforce as reasons international companies should relocate to the island.

But it cannot escape its well-known energy problems.

Chronic power outages continue to plague Puerto Rico, with two island-wide blackouts occurring, on Dec. 31 and April 16.

Crews are still repairing the power grid after it was razed by Hurricane Maria in September 2017, a powerful Category 4 storm. But the grid was already fragile from lack of maintenance and investment for decades.

“Puerto Rico needs more reliable energy for the economic growth to improve,” said Robert F. Mujica, executive director of a federal control board that oversees the island’s finances.

Woger-Nieves, of Invest Puerto Rico, said that when officials meet with company leaders, they explain the state of the island’s energy infrastructure and offer alternatives including cogeneration and renewables.

“Power doesn’t have to necessarily be an impediment,” she said.

Marxuach, with the Center for a New Economy, said Puerto Rico’s energy system is costly and inefficient, and he noted that alternatives can be expensive.

“Puerto Rico has to address some issues that actually create additional costs for investors to come here,” he said.

One of those costs is that any goods sent to the U.S. from Puerto Rico must by law be sent aboard a U.S.-flagged vessel with a U.S. crew.

Other challenges remain.

Currently, the short-term reaction of many CEOs and companies “is basically to wait and see” how the tariff war plays out, Marxuach said.

Trump has said that he wants to keep some tariffs in place, but he also has mentioned efforts to reach deals with trading partners. His team said Trump is using “strategic uncertainty” to his advantage.

Another problem is that relocating operations takes years, not months, and foreign competitors also are vying for the attention of international companies.

“We’re competing with Vietnam, South Korea, Malaysia, Singapore, that have very advanced manufacturing facilities already,” Marxuach said. “It’s not a slam dunk.”

Coto writes for the Associated Press.

The US and China have agreed to a 90-day pause on punitive trade tariffs, with both sides also set to reduce proposed levies by 115 percentage points, following trade talks in Geneva over the weekend. Chinese Vice Premier He Lifeng stressed the importance of resolving issues through equal and respectful dialogue.