Beware of data mirage ahead of all-out tariff blitz

Trend watch

Air passenger counts rebounded this week, up 2.0% week over week to 17.5 million. That’s due in part to the later spring holidays, which has caused spring break travel to be more spread out over March and April compared to 2024.

Rail freight carloads fell to a seven-week low last week. It was also the third decline in past four weeks. Similarly, the Cass Freight Index, which is a measuring of trucking shipments, fell  2.1% in March. 

Our take

Economic data is slowly beginning to reflect some of the tariff front-running we’ve been warning about for several weeks. In addition to the aforementioned weakness within rail and trucking, there was news that Apple shipped an estimated 1.5 million iPhones, or 600 tons, to the United States from India in March and early April to front run tariffs. (Smartphones and tablets are typically shipped via air cargo carriers, such as FedEx and UPS.)

While tariffs on smartphones and other consumer electronics were subsequently paused, this makes sense as companies must adjust. First, they rightly wanted to get ahead of the tariffs to maximize profits. Second, there was a flood of consumer demand for certain products, who also wanted to buy before tariffs. (It should be noted that the White House said that the tariff pause for consumer electronics was temporary.)

This sets up a bit of a mirage within some of the economic data, whereby the tariff front-running has boosted demand temporarily. However, it’s very likely that this is simply pulling forward demand from the future.

This is easily seen by auto sales, which surged to 1.56 million units in March, according to Cox Automotive. That takes the seasonally adjusted annual rate (SAAR) to 17.8 million for 2025, the highest in four years and nearly 2 million units higher than Cox’s forecast of 15.9 million. That level is clearly not sustainable, which means that demand may hit an air pocket when demand normalizes in the coming months.

Additionally, the on-again, off-again tariff are continuing to stir further uncertainty. Alas, the latest tariff pause – this one to carve out smartphones and consumer electronics – reinforces the notion that businesses should remain in “wait & see” mode, which isn’t pro-growth for the economy.

Ultimately, this uncertainty casts a long shadow over the economy, clouding decision making for businesses and consumers alike. While a recession isn’t our base case, time is not on the economy’s side. The longer this saga takes to play out, the more it gouges into economic growth. 

Bottom line

The U.S. economy has been resilient, but it’s in a holding pattern awaiting resolution on the tariffs. The longer this uncertainty lingers, the more intense the headwind for the economy becomes in the near term. That has contributed to the recent bouts of volatility in financial markets, which we expect will continue for the foreseeable future.