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California’s $4 Trillion Economy Under Pressure

California, the world’s fourth-largest economy behind only the United States, China, and Germany, is facing significant risks from the Trump administration’s hardline immigration policies. The state’s economy—valued at over $4 trillion—relies heavily on immigrant workers across sectors such as agriculture, construction, and hospitality.

New research shows that stricter immigration enforcement could cost California up to $278 billion in GDP, threatening small businesses and large industries alike. Nearly 10.6 million immigrants call California home, and about 20% of them are undocumented. This workforce has long been the backbone of the state’s growth, filling labor gaps caused by declining birth rates and an aging population.

Agriculture’s Heavy Dependence on Immigrant Labor

Agriculture remains one of the sectors most exposed to immigration enforcement. Valued at $49 billion annually, California’s farms produce a vast share of the nation’s fruits, vegetables, and wine.

The Bay Area Economic Institute and UC Merced found that 63% of agricultural workers are immigrants, and nearly a quarter are undocumented. These workers are critical in harvesting staples such as lettuce, strawberries, citrus, and grapes.

Joe Garcia, president of the California Farmworker Association, noted that automation cannot replace these jobs, which are physically demanding and often unattractive to U.S.-born workers. “Without immigrant labor, we simply wouldn’t have food on the table,” Garcia said.

Construction and Housing Development Face Shortages

Construction, another cornerstone of California’s economy, employs a workforce where over 60% are immigrants and 25% are undocumented. Worker shortages already plague the industry, especially as the state struggles with an affordable housing crisis and rebuilding efforts after devastating wildfires.

Anirban Basu, chief economist at Associated Builders and Contractors, warned that skill shortages in construction and manufacturing run deep. Historically, immigration has filled the gap, but without it, costs and delays could soar. “California is always in need of builders. Even in downturns, the demand doesn’t go away,” Basu explained.

Hospitality and Restaurants Hit Hard

Los Angeles’ hospitality industry, representing over 900 businesses, has been rattled by recent Immigration and Customs Enforcement (ICE) raids. These actions, combined with protests and heightened National Guard presence, have fueled fear among immigrant workers.

Restaurant owners report sharp declines in sales. Courtney Kaplan, who operates three restaurants in Los Angeles, said her business saw a 70% drop in sales in June alone. OpenTable data confirms that reservations across the city fell 3% year-on-year during the same period. “The uncertainty is our biggest challenge,” Kaplan said. “It feels like we’re living through a localized version of COVID all over again.”

Washington’s Response

The Trump administration insists the U.S. economy can withstand these disruptions. White House officials point to the fact that over 10% of young adults in America are not employed or in training, suggesting untapped labor is available.

“President Trump’s agenda is focused on creating jobs for American workers,” said White House spokeswoman Abigail Jackson. “There is no shortage of American minds and hands to grow our labor force.”

Yet industry leaders argue that these jobs are not easily transferable. Many positions in farming, construction, and hospitality require unique skills, long hours, and conditions that native-born workers often avoid.

The Bigger Picture

California’s dependence on immigrant workers has been a defining feature of its economy for decades. From rebuilding communities after wildfires to producing food that supplies the entire country, immigrant labor has kept industries moving even through downturns and crises.

Economists warn that without a stable labor force, the ripple effects will go far beyond California. Food prices could rise nationwide, housing shortages could deepen, and tourism revenues could shrink.

As legal battles, enforcement raids, and political debates continue, businesses and workers alike face an uncertain future—one that could reshape not just California’s economy but also the broader U.S. economic landscape.