California Overtakes Japan to Become Fourth Largest Economy in World

The Californian economy has overtaken Japan's to become the fourth-largest in the world by gross domestic product (GDP).

That is according to data from the International Monetary Fund (IMF) and the Bureau of Economic Analysis (BEA), a fact highlighted by the California governor's office as it battles President Donald Trump's trade policies.

The IMF put Japan's GDP at $4.02 trillion in 2024. That compares to California's GDP of $4.1 trillion for the same year, according to the BEA's figures. It places the state behind only the United States, China, and Germany in global rankings.

"California isn't just keeping pace with the world—we're setting the pace," Governor Gavin Newsom, a Democrat, said in a statement released Wednesday.

Why It Matters

California's import-reliant economy is projected to be hit hardest by Trump's tariffs, and Governor Newsom has been among the state leaders most vocal in criticism of the president's trade policy. The governor has framed the new data highlighting California's position as the nation's principal economic powerhouse as evidence of the progress that could be jeopardized if Trump refuses to roll back his trade policies.

What to Know

Newsom has been heavily critical of Trump's April 2 "Liberation Day" tariffs, in which the president announced "reciprocal" taxes on imports for other countries alongside a baseline tax of 10 percent on all global imports. The reciprocal tariffs have since largely been paused, with the notable exception of China.

According to recent analysis by the policy research firm Trade Partnership Worldwide, California is set feel the worst effects of the tariffs so-far announced by Trump. Estimates suggest the state could pay over $170 billion in import taxes in 2025, assuming that import demand remains flat from 2024.

Newsom said previously that California would seek to build new trading opportunities around the world to dampen the worst impacts of Trump's trade policies.

"On behalf of 40 million Americans that live in the great state of California—the tentpole of the U.S. economy ... our state of mind is around supporting stable trading relationships around the globe," the governor said in a video message posted April 4.

California would be pursuing its own trading agreements with foreign partners, Newsom added, and seeking exemptions for California-made products.

Governor Newsom filed a lawsuit against Trump on April 16 over the president's use of emergency powers to carry out his tariff plans, which accused Trump bypassing Congress' constitutional authority over trade policies. The suit cited Trump's invocation of the International Economic Emergency Powers Act—a law granting the president broad authority to deal with foreign-born threats to national security through economic means.

"The IEEPA gives the President authority to take certain actions if he declares a national emergency in response to a foreign national security, foreign policy, or economic threat," the governor's office said in a press release. "The law, which was enacted by Congress in 1977, specifies many different actions the President can take, but tariffs aren't one of them. In fact, this is the first time a president has attempted to rely on this law to impose tariffs."

The allegedly unconstitutional implementation of the tariffs has been at the center of much of the criticism, including from Republican lawmakers, some of whom have decried these as de facto tax hikes for American consumers and producers.

On Wednesday, a dozen more states filed a suit with the U.S. Court of International Trade in New York City, challenging the president's use of the IEEPA to impose tariffs. Listed as plaintiffs in the new suit are Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York and Vermont.

The lawsuit was spearheaded by New York Governor Kathy Hochul and Attorney General Letitia James, who has frequently clashed with the administration over tariffs and various other policies.

What People Are Saying

California Governor Gavin Newsom said in a statement Wednesday: "California isn't just keeping pace with the world—we're setting the pace. Our economy is thriving because we invest in people, prioritize sustainability, and believe in the power of innovation. And, while we celebrate this success, we recognize that our progress is threatened by the reckless tariff policies of the current federal administration. California's economy powers the nation, and it must be protected."

Governor Newsom's office posted to its website: "California's economy is growing at a faster rate than the world's top three economies. In 2024, California's growth rate of 6% outpaced the top three economies: U.S. (5.3%), China (2.6%) and Germany (2.9%). California's success is long-term –the state's economy grew strongly over the last four years, with an average nominal GDP growth of 7.5% from 2021 to 2024. Preliminary data indicates India is projected to surpass California by 2026."

White House spokesman Kush Desai, quoted by the BBC, said in response to the latest lawsuit, that the "administration remains committed to using its full legal authority to confront the distinct national emergencies our country is currently facing—both the scourge of illegal migration and fentanyl flows across our border and the exploding annual U.S. goods trade deficit."

Desai told NBC News: "Once again, Democrats like Letitia James are prioritizing a witch hunt against President Trump over protecting the safety and wellbeing of their constituents."

What Happens Next?

Most "Reciprocal" tariffs have been postponed, with the exception of China, for 90 days, a window the administration has said will allow nations to approach the U.S. for trading negotiations. A new minimum 10 percent tariff rate, which came into effect April 5, is still in place for goods coming from all countries.

President Trump on Tuesday said that the "very high" tariffs on Chinese goods would "come down substantially," in the future, "but it won't be zero."