Missing Economic Data May Be Masking the True Cost of Trade Tariffs

2025-12-31 economy

Washington D.C., Tuesday, 30 December 2025.
The economy’s apparent resilience against tariffs may be an illusion caused by a 43-day data blackout, with significant structural costs expected to hit in 2026.

The Data Blackout: An Economic Mirage?

As we reported in “The 2025 Tariff Wall: How Protectionist Policies Are Reshaping the American Economy” (https://wsnext.com/044606c-Trade-Policy-Tariffs/), the United States has entered a new era of protectionism unseen since the 1930s. However, the anticipated immediate shock of these policies has been obscured by a statistical fog. A 43-day government shutdown, running from October 1 to November 12, 2025, severely disrupted data collection by the Bureau of Labor Statistics, leaving economists with an incomplete picture of the fourth quarter [1]. While the headline numbers appear stable—Consumer Price Inflation (CPI) held at 2.7% for the year ending in November, and unemployment sat at 4.6%—analysts warn that these figures may not fully capture the underlying friction caused by the new trade regime [1]. The shutdown specifically delayed critical data collection, creating a vulnerability in economic statistics just as the full weight of the new tariffs began to settle [1].

The Phantom Resilience: Front-Loading and Savings

The economy’s refusal to crash immediately, despite the Yale Budget Lab reporting that the average effective tariff on U.S. imports skyrocketed from 2% to 18% in 2025, can be attributed partly to strategic corporate maneuvering [1]. Businesses engaged in massive “front-loading” of imports following the November 2024 election to beat the implementation of new levies [1]. The Penn Wharton Budget Model estimates that this inventory accumulation saved U.S. importers approximately $6.5 billion through May 2025, creating a temporary buffer against price hikes [1]. However, this inventory cushion is finite. With the suspension of the de minimis exemption on August 29, 2025, and the implementation of a 40% tariff on transshipped goods on August 7, the mechanisms for avoiding these costs are rapidly disappearing [3].

Structural Shifts: Inflationary Pressures Building

Beneath the surface of the stable headline CPI, inflationary pressure is building. Research by Alberto Cavallo indicates that prices for goods subject to the new tariffs have been rising since April, already adding 0.7 percentage points to the overall inflation rate [1]. Goldman Sachs economists argue that tariff pass-through is the primary reason core Personal Consumption Expenditures (PCE) inflation remained elevated at 2.8% throughout 2025 [4]. They project that this pass-through effect will intensify, rising from 0.5 percentage points currently to 0.8 percentage points by mid-2026 if the current tariff levels persist [4]. Furthermore, the trade landscape remains volatile; as recently as December 9, 2025, the administration threatened a new 5% tariff on water from Mexico, signaling that the “wall” is still under construction [3].

The 2026 Outlook: Optimism Meets Reality

Looking ahead to 2026, economic forecasts are diverging sharply. The White House projects robust growth of 3% to 4% by the first quarter of 2026 [7]. In contrast, Stephen Moore, a former economic advisor to the President, expressed concern on December 29, 2025, calling estimates of 5% growth unrealistic and warning that tariffs are actively suppressing economic potential [6]. Moore suggests a more modest target of 3-4% is necessary to manage the national debt curve [6]. Goldman Sachs offers a more tempered prediction of 2.6% growth for 2026, anticipating that tax cuts and deregulation might offset some of the tariff drag [4]. However, the labor market remains a significant variable; the economy lost 105,000 jobs in October 2025 before adding 64,000 in November, a net loss of 41000 jobs over the two-month period, highlighting the fragility of the recovery [4].

Conclusion

As the data collection anomalies from the recent shutdown clear, the true structural cost of the 2025 tariff policies will likely become visible in the first half of 2026. While some Wall Street sectors remain bullish, banking on future stimulus, the margin for error is razor-thin [7]. Mark Zandi of Moody’s Analytics summarized the precarious nature of the 2026 economy, noting that the outlook depends on a perfect balance of labor, inflation, and consumer behavior: “If any of those elements ‘falter’ during the year, ‘we’re toast’” [7].

Sources

Economic Outlook Trade Policy