Mr Tariff: implications of Trump trade policies for real assets

Donald Trump has described himself as “Mr Tariff” and has promised 25% tariffs on all goods imported from Canada and Mexico “on day one”, with an additional 10% tariff on those from China. This comes on top of earlier threats of 60% tariffs on China, and a blanket tariff of 10-20% on all other imports.

Some investors have been clinging to the hope that he does not follow through. Jim Wright, fund manager of the Premier Miton Global Infrastructure Income Fund, used the words “if enacted”, while another source said off the record: “I see tariffs as a negotiating tactic only. Like so many of Trump’s promised policies likely to be conveniently forgotten or prevented in Congress.”

But that sounds like wishful thinking. A president can influence trade using executive orders. And latest reports suggest the new administration is planning a blitz of executive orders following his inauguration on Monday – including on trade policies.

So what would a ramped-up trade war mean for real assets investors?

In terms of America’s suppliers, the biggest effects are likely to be on Mexico, Canada and China, in that order.

Although Mexican president Claudia Sheinbaum has so far refused to cave into Trump’s demands, the latest report from BBVA Research suggests that the trade balance between the US and Mexico is some $235bn (€228bn) in Mexico’s favour and that America accounts for 83% of Mexican exports. Trudeau flew to Mar a Lago immediately following Trump’s remarks, and exports to the US are worth US$459bn, 77% of Canadian exports. It seems likely some accommodation will be reached with both countries.

With regard to China, investors seem remarkably sanguine. Chris Dodwell, head of policy and advocacy at Impax Asset Management, points out that only “about 16% of Chinese exports go to the US, and 20% of Chinese GDP comes from exports”. He says: “So even if tariffs completely shut off exports to the US – which is very unlikely – that would only impact about 3% of China’s GDP.”

Ulrik Fugmann, co-CIO at BNP Paribas Asset Management, goes even further. “China is in the process of becoming the world leader of clean-energy technologies,” he says. “As the US is likely to pull out of the Paris Agreement, China is likely to take centre stage in clean-energy technologies and decarbonisation efforts.”

Nevertheless, there must be some overall effect on Chinese investments. Strong exports have been the sole bright spot in the Chinese economy this year, contributing 70% of the expected 4.9% headline real GDP growth, according to Goldman Sachs. “Amid significantly higher US tariffs, growth of total exports is likely to decelerate sharply,” it warns.

Concerns for real estate investors?

But really, as Peter Fox of KBI Global Investors observes, “what is going to be interesting is what the macro implications are for the US economy in all of this”. He says: “Increased productivity and manufacturing from within the US will continue to create jobs and boost economic growth. However, the offset is the inflation impact.”

“[Tariffs] will likely keep inflation in the minds of monetary policymakers and the bond market”

Peter Locke

Peter Locke, managing director of real estate at Arena Investors, warns: “[Tariffs] will likely keep inflation in the minds of monetary policymakers and the bond market, thereby keeping interest rates elevated. The commercial real estate market will have to continue to adjust to the reality of sustained higher interest [rates] possibly extending the timeline for a sharp rebound in property values.”

Tariffs could certainly affect raw materials pricing. As Carey Heyman, managing principal for real estate at consultancy CLA, says: “Proposed tariffs on appliances and materials like lumber, steel and concrete could negatively impact construction.”

A 25% tariff on Canadian imports would worsen the US housing market in crisis. Jim Tobin, the US National Association of Home Builders chief executive said in a statement: “Increasing tariffs on Canadian softwood lumber will further exacerbate our nation’s ongoing housing affordability crisis.”

Apart from these macro effects, David Roberts, head of real estate strategy at Macquarie, notes “rents coming under pressure in selective coastal markets that are exposed to China-US trade tensions”.

But by far the biggest effect on real estate will be continued onshoring. “Southern US markets will be key beneficiaries of supply-chain evolution, further aided by China’s rising unit labour costs,” Roberts continues.

Onshoring will also have a major positive impact in Europe. A fifth of new leases signed in 2024 by pan-European industrial property investor CTP “were with Asian clients, nearshoring their production locations,” says head of investor relations Maarten Otte. “In 2025, with the incoming US Trump administration potentially introducing protectionist economic policies, the looming EU’s Carbon Border Adjustment Mechanism…. and EU tariffs on Chinese electric vehicles (EV) beginning to bite, the need for nearshoring…. will become even more compelling.”

Effects on infrastructure

“Proposed tariffs on imports into the US could impact North American infrastructure across a number of areas,” says Wright – in both negative and positive ways.

Pieter Welman, head of global infrastructure at Barings, says tariffs will “quickly impact assets such as ports, which rely on trade”.

The impact on railroads should be more nuanced, according to Wright, but would “add huge complexity for networks which cross the US borders into both Canada and Mexico”. Railroads also handle imports into ports on the East and West coasts and, “to the extent that tariffs reduce seaborne volumes of containers, particularly from China and Southeast Asia, this could impact revenues and profits for the railroads”, Wright continues. However, “this may be compensated by increased domestic traffic in the US as supply chains increasingly move onshore”.

In the energy sector, there are large flows of natural gas, natural gas liquids and unrefined crude oil from Canada into the US. “These flows are vital to the US energy mix,” says Wright. “[But] the most likely impact would be higher prices for US consumers rather than lower volumes. Therefore, we would expect a very limited impact on pipeline operators.”

For the utilities sector, potentially the biggest impact “would be to increase the cost of solar panels and batteries”, says Wright. But this is likely to be passed through to US electricity consumers. US companies imported $4bn worth of lithium-ion batteries from China in 2022, and proposed tariffs could more than double costs, making batteries more expensive for EVs, solar systems and grid storage.

The US imported $44bn of EVs last year mainly from Mexico, which exports EVs made by companies like Ford and GM. “An increase in tariffs on imported vehicles may increase the cost of adoption of EVs and therefore lower the adoption curve,” says Michael Steingold, director of private markets at Russell Investments. Similarly, steel – crucial for building wind turbines, solar farms and other clean-energy infrastructure – often comes from countries like Mexico and Canada.

On the other hand, as Brendan Wallace the founder of proptech investor Fifth Wall, says, Trump’s tariffs “will massively bolster US manufacturing of batteries and solar”.