The new tariff policies announced by President Donald Trump on Wednesday shocked the world and sent financial markets into bear territory, but elected officials are scrambling to find workarounds.
California Gov. Gavin Newsom is leading the way. The Democrat said Friday that he’s working on agreements with various countries for his state to be exempt from the retaliatory tariffs imposed on the U.S.’s largest trade partners, which include Canada, Mexico and China.
“We will not sit idly by during Trump’s tariff war,” Newsom wrote alongside a video posted to X. “[California is] the 5th largest economy in the world. We’re not scared to use our market power to fight back against the largest tax hike of our lifetime.”
It’s unclear what levers Newsom has at his disposal. A Fox News report he shared in his message claims that states don’t have the authority to negotiate separate trade deals, per the U.S. Constitution.
But it’s possible that governors could ask trade partners to adjust any retaliatory tariffs to inflict less pain on states that oppose Trump’s tariffs, which are sweeping in both scope and scale.
Homebuilder headaches
Homebuilders are directly impacted by the new tariffs since they are targeted toward trade partners that provide critical construction materials.
While Trump maintaining the status quo on Canada and Mexico was a win for builders, the 54% tariff on China is a huge blow. The Asian nation provides significant shares of essential building inputs for the U.S., including appliances, glass, hardware and plumbing fixtures.
The market recognizes this problem as homebuilder stocks got hammered on Thursday. LGI Homes (down 9%), Toll Brothers (-8%) and Meritage Homes (-6.8%) dropped the most. Builder stocks rebounded a bit in early trading on Friday.
One tariff bright spot for the housing industry is that mortgage rates have dropped in response as investors abandon equities in favor of bonds. The 30-year conforming loan rate had fallen to 6.77% as of Friday afternoon, according to HousingWire‘s Mortgage Rates Center.
Congressional response
Newsom isn’t the only one making an effort to push back on Trump.
Four Senate Republicans joined Democrats on Wednesday to pass a bill that would block a 25% tariff on Canada, which Trump used an emergency declaration to implement.
Washington Sen. Maria Cantwell teamed up with Iowa Sen. Chuck Grassley on Thursday to introduce legislation that would give Congress more authority over tariffs and trade.
“Trade wars can be devastating, which is why the Founding Fathers gave Congress the clear Constitutional authority over war and trade,” Cantwell said. “This bill reasserts Congress’s role over trade policy to ensure rules-based trade policies are transparent, consistent and benefit the American public.”
Any effort on the national level is likely dead on arrival since the Republican-controlled House of Representatives has shown little willingness to criticize Trump, much less push back against him.
To the contrary, rank-and-file Republicans have been full-throated in their support for the new tariff regime. They have echoed Trump’s claims that the world has been “ripping off” the U.S. by being “very unfair” to the world’s largest economy.
It’s unclear what Trump’s goal is. At times, he’s claimed that additional revenue from tariffs will help reduce the federal deficit, but he has also offered contradictory aims to lower duties that other countries have on the U.S.
So far there are only a few indications that this will lead to the latter. Trump hit Vietnam with a staggering 46% tariff, and on Thursday the country offered to cut all tariffs on the U.S. as part of a possible deal.
Other Southeast Asian countries — whose economies have grown increasingly tied to consumption in the U.S. — have made similar overtures.
But America’s largest trade partners have signaled the opposite. Canada slapped a 25% tariff on U.S. automobiles in response to Trump’s tariff on Canadian autos, while China implemented a true reciprocal tariff of 34% in retaliation. The European Union has suggested it may do the same.
The key to how this plays out may rest in the hands of the American people, whom economists say will bear the brunt of Trump’s trade war. Wedbush Securities has projected that iPhones could cost more than $3,000 under Trump’s tariff regime, while cars will cost $5,000 to $15,000 more.
Nintendo signaled trouble ahead by delaying preorders for its next-generation console Switch 2, citing uncertainty related to the trade war.
Coupled with Elon Musk’s dramatic cuts to the federal government — which have caused delays in subsidies like Social Security checks — higher prices related to the tariffs could stir unrest in the U.S.
