How to clear System Data from MacBook Pro hard drive?

System Data is not a singular file.

The category named System Data (or Other) is a general category that measures the storage space used by all Apple and third-party files that don’t belong to any more specific category like Applications, Documents, Messages, Music Creation, Podcasts, Trash, and TV.

You cannot directly manage the contents of system data. That is done by macOS. The category varies in size depending on the current state of your Mac.

What you can do to create more free space:

• Reboot your Mac at least weekly. Let the OS clear caches and do housekeeping.

• Empty the Trash in the Dock. 

• Empty the trash in the Photos app.

• Delete unused and unneeded application installers from your downloads folder and desktop. No need to store on your Mac what you can freely download any time.

• Transfer files that you don’t use daily to an external drive and then delete them from the startup drive and empty the trash. Files that take up the most room are movies, images and music.

This from Apple on the subject of freeing up space:

Free up storage space on Mac - Apple Support

Also, please see the following guidance from Apple: 

Find and delete files on your Mac - Apple Support

MacOS does keep a number of Time Machine snapshots on the drive as part of the backup process.  TM snapshots can occupy a significant amount of drive space. You can disable the creation of these many TM snapshots by setting TM to backup manually rather than automatically at intervals.

You can view and manage these TM snapshots in Disk Utility.

View APFS Snapshots in Disk Utility on Mac - Apple Support 

You can also use apps such as DaisyDisk from Software Ambience or OmniDiskSweeper from Omni Labs to find large files on your drive.  Once you've located these larger user files, you can relocate them to another drive and/or delete them if they aren't needed.

You're welcome.

The biggest issue I see here is the low capacity startup drive. That 256 GB does not go very far in today's world of computers. We see very many complaints just like yours here in the community every day and they usually involve these particularly low capacity drives.

MacOS needs an amount of free space to function properly. A rule of thumb is to always keep a minimum of ~ 10%-15% of the startup drive capacity free, or a minimum of ~50 GB on a low capacity drive such as yours. Unfortunately that means if you count the ~15 GB the OS occupies, plus the 50 GB free space required, you're limited to only ~185 GB of space for everything else you want to have on the computer. That's very limiting and difficult to manage.

The best thing you can do is simply remove all the unnecessary files and data that are on the disk over to an external drive for storage and access, and then delete those things from the startup drive. Keep only the files and data that are essential for your business. Don't keep music, vids, application installers, a photo library and such files. These types can eat significant storage.

Small transportable external drives are readily available and easy to put in service and use. A 1-2 TB external brand name drive can be found on Amazon for a cost in the neighborhood or $100 or so. This, for example: LaCie Rugged External Portable Drive USB 3 - Amazon

Read the article posted earlier to properly understand iCloud.

In summary - it' a synch service, intended to keep stuff in synch across Mac devices. It's not really a separate drive to give you more space - it's not like having a USB drive to keep all your, say, work documents on. It can sort of be used like this by turning on Optimize - see the article.

In Finder go into the search box and just type a couple of characters. "Save" "+" should appear . click on + and you'll get some search options. Click "Name" and you'll get a drop down. Pick File Size and enter 100 and click units to get MB. Delete whatever characters you put in the search box and hit enter. Sort the results by file size and you will see all your files bigger than 100MB. Fiddle with the size if it's too big, but you'll get a list showing which of your files are hogging the space.

Follow up-

Regarding what is going on with iCloud Drive, I'm not especially savvy about how or how well this feature works to minimize the storage used on the Mac. I do myself use the iCloud features to sync contacts and calendars among my devices, and I do access and use iCloud Drive for some files but I don't use it to manage the space on my Mac per se.

Apple does provide guidance, and this link may help you get started: Store files in iCloud Drive on Mac - Apple Support