Where Are Tariffs Showing Up in the Economic Data?

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What’s new in the economy?

• Tariffs have not yet made their way into inflation: the Consumer Price Index was 2.4% year over year in March, its lowest level in six months. 
• The job market is still reasonably strong, but it continues to be weaker for job-seekers. The unemployment rate and layoffs are low by historical standards, but job openings and the hiring rate continue to be lackluster.
• The U.S. GDP contracted for the first time since 2022, driven by a surge in imports as companies tried to pull purchases ahead of tariffs and build inventory in the U.S. 
• Consumer spending grew by 1.8%, higher than market expectations, albeit at a lower rate than the previous three quarters.

Consumer says:

Now onto consumer data from Morning Consult. If you prefer listening, stream our podcast episode here.

“Soft data” indicators, including the Index of Consumer Sentiment (ICS) continue to deteriorate post-inauguration, as policy uncertainty has made respondents more pessimistic about the outlook for the U.S. economy.

In a reversal from previous trends, Republicans are now also reporting souring economic sentiment after the latest round of tariffs, signaling that negative expectations on the economy have broken through some of the recent partisan trends.

Most of the sentiment declines continue to be driven by the future expectations subindexes that comprise ICS, perhaps somewhat explaining the current divergence between “hard” and “soft” data. Hard data, such as consumer spending, has remained relatively strong in the face of current economic headwinds. The growth in Morning Consult’s spending data continues to be primarily driven by higher-income consumers, who increased their spending in each successive month in the first quarter of 2025.

Some of Q1’s spending strength could be attributed to “pull-ahead” spending driven by consumers making purchases earlier to avoid some of the costs they expect from newly implemented tariffs. In fact, the negative GDP growth in Q1 was driven primarily by a large ramp-up in imports, as businesses and consumers alike front-loaded spending ahead of tariffs. However, some of the strength can also be attributed to the fact that current uncertainty and new policies have not impacted consumers' wallets or jobs yet.

Further reading:

• Check out our latest memo for a more in-depth look at consumer spending in the first quarter of 2025. In it, we break down what’s driving trends and how downside risks threaten to dampen spending going forward.
• More specifically, our report on data freshly surveyed and collected after “Liberation Day” examines how opinions on tariffs have evolved since December, and what that means for spending going forward.
• Related to our currently “frozen” labor market, our colleagues released a blockbuster State of Workers report that explores some of the workers' perspectives that may be driving the topline trends in current labor data.

… Stay tuned, and we’ll be back with more economic insights & research updates in two weeks.