California Surpasses Japan to Become World’s Fourth Largest Economy

• Apr 25, 2025

California’s economy has officially surpassed Japan’s, making the U.S. state the fourth largest economy in the world. New data from the International Monetary Fund (IMF) and the U.S. Bureau of Economic Analysis shows that California’s gross domestic product (GDP) reached $4.10 trillion in 2024, slightly ahead of Japan’s $4.01 trillion.

With this milestone, California now ranks behind only Germany, China, and the United States as a whole in terms of economic size. Governor Gavin Newsom highlighted the significance of the achievement, stating, “California isn’t just keeping pace with the world – we’re setting the pace.”

California’s economic strength comes from its diverse industries. It leads the U.S. in manufacturing and agriculture, is a hub for technological innovation, and serves as the global center for the entertainment industry. It also houses the country’s two largest seaports, contributing significantly to trade.

Despite this success, Newsom expressed concern over the impact of federal trade policies on the state's economic future. He has been a vocal critic of former President Donald Trump’s tariff strategies, which include a 10% levy on imports from nearly all countries and a 25% tariff specifically targeting Mexico and Canada. China, the U.S.’s top trade rival, has been hit with import taxes of up to 145%, prompting retaliatory tariffs of 125% on American products. When combined with earlier tariffs, the total tax on some Chinese imports could reach 245%.

Newsom has challenged Trump’s authority to impose these tariffs, arguing that they hurt California’s economy and disrupt global markets. “While we celebrate this success, we recognise that our progress is threatened by the reckless tariff policies of the current federal administration,” he said.

Meanwhile, Japan’s economy is facing challenges due to its declining and ageing population. This demographic shift is shrinking the workforce and increasing the cost of social care. The IMF recently lowered Japan’s economic growth forecast and suggested its central bank may raise interest rates more slowly than planned.

According to the IMF, tariffs introduced in early April, along with the resulting economic uncertainty, have weakened Japan’s recovery despite recent wage growth that had increased consumer spending.

With strong growth and diverse industries, California continues to lead among global economies, but its future remains closely tied to national trade policies and global market stability.