California Surpasses Japan to Become World’s Fourth-Largest Economy
April 25, 2025
In a milestone achievement that underscores its economic resilience and global influence, California has officially overtaken Japan to become the fourth-largest economy in the world by gross domestic product (GDP), according to newly released data from the International Monetary Fund (IMF) and the U.S. Bureau of Economic Analysis (BEA).
California’s GDP reached $4.1 trillion in 2024, surpassing Japan’s estimated $4.02 trillion. This places the Golden State behind only the United States, China, and Germany on the global economic leaderboard. Governor Gavin Newsom celebrated the development, declaring that California is “not just keeping pace with the world — we’re setting the pace.”
Economic Growth Amid Political Tensions
This economic achievement comes at a politically charged moment, as California finds itself at odds with the federal government over trade policies introduced by former President Donald Trump. These policies, especially tariffs introduced under the guise of national emergency powers, have been heavily criticized by state officials for their potential to hinder California’s trade-dependent economy.
Governor Newsom has emerged as a vocal opponent of Trump’s tariff regime. His administration argues that California’s economic gains could be undermined by the sweeping import taxes enacted in April 2024, which include a baseline 10% tariff on all imports and “reciprocal” tariffs targeting specific trade partners.
Although many of these reciprocal tariffs have been temporarily paused, the exception remains China, a key trading partner for California. According to a policy brief by Trade Partnership Worldwide, the state could face over $170 billion in import taxes in 2025 if import volumes remain stable.
California’s Response: Trade Diversification and Legal Action
To mitigate the impact of federal trade actions, Governor Newsom announced plans to explore independent trade agreements with foreign nations and seek exemptions for California-made goods. “California’s future relies on stable, cooperative international trade,” Newsom emphasized in an April 4 video message, advocating for diplomacy over economic isolationism.
In a bold legal move, Newsom filed a lawsuit against the federal administration on April 16, challenging the constitutionality of using the International Economic Emergency Powers Act (IEEPA) to justify the tariffs. The lawsuit claims that while IEEPA grants the president wide-ranging powers during declared emergencies, it does not authorize the imposition of tariffs — a first-of-its-kind interpretation that legal experts argue oversteps Congressional authority.
Growing Coalition Against Tariffs
California is not alone in its legal opposition. Twelve other states — including New York, Oregon, and Illinois — have joined the legal challenge, which is now being heard by the U.S. Court of International Trade in New York City. Spearheaded by New York Governor Kathy Hochul and Attorney General Letitia James, the multi-state lawsuit aims to curtail what they describe as a dangerous overreach of executive power.
Meanwhile, Republican critics have also voiced concerns, calling the tariffs “hidden tax hikes” that disproportionately burden American businesses and consumers.
By the Numbers: California’s Economic Momentum
California’s economic trajectory is not just notable in size, but also in speed. In 2024, the state’s GDP grew by 6%, outpacing the U.S. (5.3%), China (2.6%), and Germany (2.9%). Over the past four years, California has maintained an average nominal GDP growth rate of 7.5%, driven by innovation, tech, sustainability initiatives, and a diverse workforce of over 40 million residents.
However, the state’s position may be challenged in the near future. IMF projections suggest that India, currently the world’s fifth-largest economy, could overtake California by 2026, underscoring the dynamic nature of global economic competition.
What’s Next?
While the bulk of the “reciprocal” tariffs are on hold for a 90-day period to allow for negotiation, the 10% baseline tariff introduced on April 5 remains in effect. President Trump indicated that tariffs on Chinese goods may decrease “substantially” over time, though he confirmed they “won’t be zero.”
In response to the legal challenge, White House spokesperson Kush Desai defended the administration’s stance, saying the measures are essential to addressing national threats such as illegal immigration and the growing trade deficit. “Once again, Democrats like Letitia James are prioritizing political attacks over national interests,” he told NBC News.
California’s rise to the fourth-largest global economy serves as a testament to the power of innovation, strategic investment, and global trade. However, the ongoing tariff battle highlights the fragility of that progress. As international trade remains a cornerstone of the state's prosperity, the coming months will be critical in determining whether California’s momentum can withstand federal economic headwinds.