Mixed Economic Data Offers Unclear Picture of US Resilience Amid Tariff Policy Shifts

A new round of US economic data released Thursday offered a complex and sometimes contradictory view of how the economy is performing amid President Donald Trump’s evolving trade policies and tariff adjustments, CNN reports.

The Commerce Department reported that gross domestic product (GDP) contracted at an annualized rate of 0.5% during the first quarter of 2025, a downward revision from the previous estimate of a 0.2% decline. This marks a sharper contraction than previously thought, reinforcing concerns about the early-year economic slowdown.

Consumer spending, a key pillar of the economy, was revised significantly lower. It rose just 0.5% in the first quarter — the weakest pace in over four years — down from the earlier estimate of 1.2%. Analysts say that may reflect growing caution among households facing higher prices and economic uncertainty tied to trade policy.

On the labor front, data from the Labor Department showed that continuing claims for unemployment benefits rose by 37,000 to nearly 1.97 million, the highest total since late 2021. Some Federal Reserve officials, however, downplayed the increase, attributing it to a gradual normalization of hiring trends.

San Francisco Fed President Mary Daly told Bloomberg on Thursday that while the data reflects a longer job search process, there are no broad warning signs suggesting the labor market is in distress.

“It’s a shift to a more sustainable pace,” she said.

Yet the economic picture is not uniformly negative. Business investment showed signs of resilience, even as companies navigate policy uncertainty. New orders for durable goods rose 16.4% last month, fueled in large part by increased demand for transportation equipment. More notably, non-defense capital goods orders excluding aircraft — a key indicator of business investment — climbed 1.7% in May, rebounding from a 1.4% drop in April.

This improvement coincided with a reduction in mutual tariffs between the US and China. China recently cut tariffs on American exports from 125% to 10%, while the US reduced tariffs on Chinese goods from 145% to 30%, potentially easing some of the pressure on businesses engaged in global trade.

Despite the weak first-quarter growth, market sentiment has remained relatively strong. The S&P 500 is approaching record highs, suggesting investors are already looking past earlier economic weakness and anticipating a more stable environment with softer tariffs and improving trade conditions.

Paul Stanley, chief investment officer at Granite Bay Wealth Management, noted that “Thursday’s GDP is backward-looking,” and that markets had already priced in tariff-related disruptions earlier in the year. Now, he said, investors appear focused on what lies ahead, particularly in terms of policy clarity and corporate adaptation to the new trade landscape.

For the Federal Reserve, the revised GDP data may not significantly alter the outlook. Ryan Sweet, chief US economist at Oxford Economics, said the central bank remains more concerned with inflationary risks and labor market developments than retrospective growth figures.

“If the Fed pivots to rate cuts later this year, it’s likely to be in response to the labor market, not GDP,” he wrote in a note to clients.