California Surpasses Japan to Become World’s Fourth-Largest Economy

California has officially overtaken Japan to become the fourth-largest economy in the world, based on new figures from the International Monetary Fund (IMF) and the U.S. Bureau of Economic Analysis (BEA). According to the latest data, Japan’s gross domestic product (GDP) stood at $4.02 trillion in 2024, while California’s reached $4.1 trillion for the same period. This milestone positions California behind only the United States, China, and Germany on the global economic stage.

Governor Gavin Newsom, a Democrat, heralded the achievement in a statement released on Wednesday, emphasizing California’s role as a global economic leader. “California isn’t just keeping pace with the world—we’re setting the pace,” Newsom said.

Trade Policy Tensions

This economic achievement comes against the backdrop of an escalating trade dispute between California and the Trump administration. Newsom has been a vocal critic of President Donald Trump’s aggressive trade policies, particularly the “Liberation Day” tariffs announced on April 2. These measures include a baseline 10 percent tariff on all global imports and higher “reciprocal” tariffs targeted at specific nations, notably China.

California, heavily reliant on imports, stands to suffer disproportionately from these tariffs. Trade Partnership Worldwide, a policy research firm, estimates that the state could pay over $170 billion in import taxes in 2025 if demand remains steady.

In response, Newsom announced that California would actively pursue independent trade agreements with foreign partners and seek exemptions for California-made goods to mitigate the economic damage. “Our state of mind is around supporting stable trading relationships around the globe,” he said in an April 4 video message.

Legal Challenges to Trump’s Tariffs

Tensions escalated further when Governor Newsom filed a lawsuit against President Trump on April 16, challenging his use of the International Economic Emergency Powers Act (IEEPA) to impose tariffs. According to the lawsuit, the IEEPA, passed by Congress in 1977, does not authorize the president to impose tariffs even during a declared national emergency.

This legal challenge contends that Trump’s actions bypass Congress’ constitutional authority over trade. Several Republican lawmakers, along with Newsom and other Democrats, have criticized the tariffs as unlawful and detrimental to American consumers and producers.

Adding to the pressure, a coalition of twelve additional states—including Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York, and Vermont—filed a similar lawsuit with the U.S. Court of International Trade in New York City. Spearheaded by New York Governor Kathy Hochul and Attorney General Letitia James, the coalition aims to block the president’s tariff measures.

Reactions from Washington

In response to the mounting legal challenges, White House spokesman Kush Desai defended the administration’s actions, arguing they are necessary to address urgent national emergencies, including illegal immigration, fentanyl trafficking, and the growing U.S. trade deficit. Desai also accused Democratic officials of engaging in a politically motivated “witch hunt” against President Trump.

Despite the criticism, the Trump administration has agreed to a temporary 90-day postponement of most “reciprocal” tariffs—except those on China—to allow time for negotiations. However, the baseline 10 percent tariff on all imports remains in effect as of April 5.

President Trump indicated that while tariffs on Chinese goods may eventually be reduced, they “won’t be zero,” signaling continued economic friction in the months ahead.

Future Outlook

While California celebrates its remarkable economic growth, challenges loom on the horizon. Preliminary data suggest that India, with its rapidly expanding economy, could surpass California by 2026. Moreover, the ongoing trade disputes and new tariff regimes could significantly impact the state’s economic trajectory if not carefully managed.

As Governor Newsom stated, “Our economy is thriving because we invest in people, prioritize sustainability, and believe in the power of innovation.” However, sustaining this growth will require navigating the volatile trade environment created by federal policies and ensuring California remains resilient in the face of global and domestic challenges.