The Resilience of U.S. Consumer Spending Amid Inflationary Pressures: Why Tariffs and Rising Costs Have Not Yet Derailed Durable Goods Demand

The U.S. economy’s durable goods sector has defied expectations in 2025, maintaining a fragile but notable resilience despite inflationary pressures and a surge in tariffs. While the Federal Reserve’s tightening cycle and global trade tensions have created headwinds, consumer spending and strategic corporate orders have cushioned the blow. This analysis unpacks why durable goods demand remains afloat—and what investors should watch for in the coming months.

The GDP-Consumer Spending Paradox

The U.S. Bureau of Economic Analysis reported a 3.0% annualized GDP growth in Q2 2025, driven by a 30.3% drop in imports and a 1.4% rise in consumer spending on durable goods like motor vehicles [1]. This divergence highlights a key dynamic: while tariffs and inflation have raised input costs, consumers have continued to prioritize durable goods, particularly in sectors like automotive and aerospace. For example, Boeing’s May 2025 civilian aircraft orders and Korean Air’s $50 billion jet order in July 2025 temporarily offset broader declines [3].

However, the data is mixed. The U.S. Census Bureau noted a 2.8% drop in new durable goods orders in July 2025, the second consecutive monthly decline [2]. This volatility underscores the sector’s reliance on large, sporadic orders. The three-month average of durable goods orders, however, reached a record $319.5 billion in July, up 10.2% from six months prior [3]. This suggests that while short-term demand is uneven, the underlying trend remains upward.

Tariffs: A Double-Edged Sword

The July 2025 tariff hikes have had a dual impact. On one hand, they’ve protected domestic manufacturers by reducing reliance on imports. The Budget Lab at Yale found that U.S. manufacturing output expanded by 2.1% in the long run, with nonadvanced durable manufacturing up 3.9% [4]. On the other hand, tariffs have inflated input costs for sectors like semiconductors and transportation. June 2025 durable goods orders plummeted 9.3%, with transportation orders falling 22.4%—a direct consequence of higher tariffs on critical components [3].

Yet, the inflationary effects are not uniform. The durable goods PCE price index turned negative in July 2025, signaling a rare decline in prices after a period of inflation [1]. This shift reflects two factors: heightened consumer price sensitivity and competition in sectors like electronics and appliances. Companies are struggling to pass on tariff costs to consumers, forcing them to absorb margins or innovate to maintain competitiveness [1].

What’s Next for Durable Goods?

Deloitte’s baseline forecast predicts a modest 0.7% growth in durable goods spending in 2025, constrained by elevated interest rates and tariffs [4]. However, the sector’s resilience hinges on two variables:
1. Corporate Investment: Large orders from aerospace and automotive giants will continue to prop up demand.
2. Consumer Behavior: If inflation moderates and wage growth outpaces price increases, durable goods spending could rebound.

Conclusion

The durable goods sector is navigating a complex landscape of tariffs, inflation, and shifting consumer priorities. While short-term volatility is inevitable, the interplay of strategic corporate orders and resilient consumer demand suggests the sector will remain a cornerstone of U.S. economic growth. Investors should monitor tariff policy changes and input cost trends, but for now, the data supports a cautiously optimistic outlook.

**Source:[1] Gross Domestic Product, 2nd Quarter 2025 (Advance Estimate) [https://www.bea.gov/news/2025/gross-domestic-product-2nd-quarter-2025-advance-estimate][2] Durable Goods Orders Down 2.8% in July, Less Than Expected [https://www.advisorperspectives.com/dshort/updates/2025/08/26/durable-goods-orders-down-2-8-in-july-less-than-expected][3] Manufacturing of Durable Goods on Rebound in the US [https://wolfstreet.com/2025/08/26/manufacturing-of-durable-goods-on-rebound-in-the-us][4] United States Economic Forecast Q2 2025 [https://www.deloitte.com/us/en/insights/topics/economy/us-economic-forecast/united-states-outlook-analysis.html]