Posted originally on Apr 28, 2025 by Martin Armstrong 

California recently surpassed Japan to become the World’s fourth-largest economy behind the United States, China, and Germany. The International Monetary Fund believes California’s nominal GDP is $4.1 trillion, surpassing Japan’s $4.01 trillion.

While many businesses have fled California due to excessive taxation and regulation, it remains the home of 57 Fortune 500 companies, which is more than any other state in the US. Apple, Alphabet (Google), Chevron, Meta, Nvidia, Netflix, Molina, Qualcomm, Intel, and others have headquarters in the Golden State. While five Fortune 500 companies departed from California last year, it gained 9 new entrants.

California has attracted over 40% of US venture capital, becoming the home of many startups in AI and biotech. In Q1 of 2024, 59.25% of all new US venture capital was raised in California, up from 37.9% on an annual basis. Startups in California generated $20.9 billion in Q1 of 2024, the highest quarterly total on record. For 2024 as a whole, California claimed 48.79% of the nation’s venture capital, raising over $43 billion.

Tourism is another money maker for the state, raking in $156.7 billion in 2024, a 4% annual increase and an all-time high. International spending on tourism generated $27.8 billion as the state has finally recovered from the post-pandemic dip in travel. Domestic spending accounted for $129 billion in tourism last year, a 4% annual uptick. California’s tourism sector alone provides 1.15 million jobs.

Agriculture is a major cornerstone of the state’s economy as well. Over 40% of the state’s land is used for farming, totaling 40 million acres, including 8.5 million irrigated acres. The state heavily relies on migrant workers to maintain these farmlands, leading to political differences with Washington. California produces 75% of America’s fruits and nuts, and 40% of vegetables. The Golden State generated $59.4 billion from agriculture in 2023. The state directs 40% of its water usage to farmlands, and water usage will become a key item to consider going forward.

“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,” Governor Gavin Newsom said in a statement. “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,” he added.

Newsom believes the US economy will shrink by $100 billion annually as a result of tariffs. California is suing the Trump administration to overturn tariffs, along with Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, New York, Nevada, New Mexico, Oregon, and Vermont. Newsome is suing the Trump Administration for its deportation efforts as well, as his state’s economy needs migrants for its agriculture sector. California has launched its own tourism marketing campaign geared toward Canadians to separate the state from the federal government.

California also hosts the largest deficit of all US states. It relies heavily on Washington for financial support. If California were to secede, it would not be a utopia. It would be a fragmented region with massive capital flight, internal divisions (North vs. South California). Not to mention, the state does not have a military or currency of its own. Still, California’s strengthening economy and desire to separate itself from Washington will result in louder chants for succession and independence.