California Surpasses Japan as World’s Fourth-Largest Economy, But Sounds Alarm on Tariff Threats

California has officially overtaken Japan to become the fourth-largest economy in the world, according to new data released by the U.S. Bureau of Economic Analysis. The Golden State’s nominal GDP climbed to $4.1 trillion in 2024, edging past Japan’s $4.02 trillion as reported by the International Monetary Fund.

Governor Gavin Newsom celebrated the milestone on Wednesday, describing California as a global economic leader whose growth outpaced even the U.S., China, and Germany last year. The state recorded a robust 6% GDP growth in 2024, driven by a thriving tech industry, real estate, and finance sectors centered in Silicon Valley.

“California isn’t just keeping pace with the world – we’re setting the pace,” Newsom said in a statement. “Our economy is thriving because we invest in people, prioritize sustainability, and believe in the power of innovation.”

Yet, amid the celebration, Newsom raised concerns over the impact of trade policies enacted under President Donald Trump, particularly a wave of tariffs imposed through emergency powers. The governor warned that such policies could jeopardize California’s economic momentum.

“California’s economy powers the nation, and it must be protected,” Newsom said, referring to the tariffs as “reckless” and damaging to families, businesses, and supply chains across the state.

In response, California filed a lawsuit against the federal government on April 16, challenging Trump’s use of emergency powers to impose tariffs on key trading partners, including China, Canada, and Mexico. The legal challenge argues that the former president overstepped his authority under the International Economic Emergency Powers Act (IEEPA), which allows for executive action in national emergencies but requires congressional oversight.

The state says the tariffs have inflated costs, disrupted trade, and caused billions of dollars in damages – particularly to California’s manufacturing and agriculture sectors.

“Trump’s tariffs are causing immediate and irreparable harm,” Newsom’s office stated. “They’ve inflated costs, derailed supply chains, and put undue pressure on California businesses and consumers.”

Twelve other states have also joined the legal battle, accusing the Trump administration of unlawfully imposing what they describe as widespread tax hikes on Americans.

California, home to nearly 40 million people, accounted for roughly 14% of the U.S. GDP in 2024. The state conducted nearly $675 billion in two-way trade last year, with Mexico, Canada, and China ranking as its top trading partners. Together, those three countries accounted for over 40% of California’s imports – more than $203 billion of the state’s total $491 billion in 2024.

As global economic dynamics shift and political tensions rise over trade policy, California is positioning itself not just as an economic powerhouse, but also as a defender of open markets and innovation-led growth.