California has reached a major milestone, officially passing Japan to become the fourth largest economy in the world. Governor Gavin Newsom announced the news this week, pointing to new data that highlights California’s growing influence on the global stage.
How Big Is California’s Economy?
According to the International Monetary Fund’s (IMF) 2024 World Economic Outlook and data from the U.S. Bureau of Economic Analysis (BEA), California’s nominal Gross Domestic Product (GDP) rose to $4.1 trillion. This edged out Japan’s $4.02 trillion, putting California behind only the United States at $29.18 trillion, China at $18.74 trillion, and Germany at $4.65 trillion.
Governor Newsom celebrated the achievement, saying, “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.”
With a population close to 40 million, California has become a global hub for industries such as technology, entertainment, agriculture, and manufacturing. The Golden State has built a broad and resilient economy that fuels not only its own growth but also national prosperity.
Who Did California Surpass and What Is Their Economic Position?
Japan, once the second-largest economy in the world during the 1980s and early 1990s, has struggled with slow growth for decades. A combination of an aging population, stagnant wages, and economic policy challenges has kept Japan’s GDP from expanding as rapidly as it once did.
California’s growth, by contrast, has been swift and steady. The state’s GDP growth rate in 2024 was 6 percent, compared to Japan’s much slower pace. This marks a significant shift in the global economic landscape, coming just six years after California passed the United Kingdom to become the fifth-largest economy.
What Has Fueled California’s Growth?
Several major factors have fueled California’s rise. Between 2021 and 2024, California’s economy grew at an average nominal rate of 7.5 percent, outpacing national and global averages. In 2024 alone, its 6 percent growth exceeded the United States’ 5.3 percent, China’s 2.6 percent, and Germany’s 2.9 percent.
California leads the country in new business starts and venture capital investment. It is also the top state for manufacturing output, home to more than 36,000 manufacturing companies that employ over 1.1 million people. The Golden State remains the nation’s largest agricultural producer, supplying goods from almonds to wine to markets around the world.
Tourism has also surged to record highs, further boosting the economy. Despite challenges like a shortage of affordable housing and a homelessness crisis, California’s population has continued to grow, showing the state’s enduring appeal.
California also contributes more to the federal government than it receives, sending an estimated $83 billion more annually than it gets back in federal funding. This makes the state a major engine for the country’s overall financial health.
Conflict Over Federal Tariffs
Even as California celebrates this milestone, Governor Newsom has warned that federal policies could threaten the state’s economic success. In particular, he criticized President Donald Trump’s broad tariffs on imports, calling them “reckless” and harmful to businesses and consumers alike.
Newsom stated, “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.”
Last week, California filed a lawsuit against the Trump administration, arguing that the president’s use of emergency powers to impose tariffs is unlawful. Newsom emphasized, “No state is poised to lose more than the state of California,” adding that the effects of the tariffs are already being felt across industries. The lawsuit claims that the tariffs have “wreaked havoc on the economy, destabilized the stock and bond markets, caused hundreds of billions of dollars in losses, and inflicted higher costs for consumers and businesses.” It asks for an immediate halt to the tariffs and for the courts to declare them illegal.
According to the lawsuit, these tariffs are expected to shrink the U.S. economy by $100 billion each year if they remain in place.
President Trump and his administration, however, have defended the tariffs as necessary tools to rebalance global trade. They argue that American companies have long suffered under unfair practices by foreign nations, and that tariffs are helping bring manufacturing jobs back to the United States.
White House Press Secretary Karoline Leavitt said, “There is a lot of progress being made. We now have 18 proposals on paper that have been brought to the trade team.” She added that members of Trump’s trade team were actively engaged with 34 countries to negotiate new deals.
“You have Secretary Bessent, Secretary Lutnick, Ambassador Greer, NEC Director Hassett, and Peter Navarro, the entire trade team meeting with 34 countries this week alone,” Leavitt explained. “We are moving at Trump speed to ensure these deals are made on behalf of the American worker and the American people.”
The Trump administration argues that these trade agreements will ultimately benefit American workers and businesses by creating fairer global competition and incentivizing domestic manufacturing.
Looking Ahead
Although California’s economy is booming for now, there are signs of competition on the horizon. Preliminary data suggests that India, with its rapidly expanding economy, may surpass California’s GDP by 2026.
Still, for the present, California stands proudly as the world’s fourth-largest economy. The Golden State’s ability to innovate, grow, and adapt continues to set it apart. As Newsom concluded, “California’s success is long-term. We are investing in a future that ensures we not only keep pace with the world but lead it.”
