IPE RE Conference: Uncharted, uncertainty, unintended – the changing face of global trade

The three watch words for the real estate industry are “uncharted”, “uncertainty” and “unintended”, according to Hanna Norberg, independent international trade policy adviser, founder and principal, Trade Economista.

Opening the annual IPE Real Estate Global Conference, this year in Copenhagen, she focused on these three words and what they mean for the more-than-400 delegates in the room, and the wider industry.

Norberg said: “We are in completely uncharted waters on trade. There’s no doubt about that, and tariffs are the name of the game. The second word is uncertainty. The current administration in the White House is using chaos and uncertainty to push through their agenda.

“And the last word is unintended. With all the decisions and the policies that are coming out of the White House, a lot of unintended consequences will ensue, and that will set much of the outcome of the current events going forward.”

Starting with the uncharted waters, Norberg said the US administration had made “a very visible 180 degree turn” over the past 10 years, from pushing forward on a global collaborative system to an era where “we have a new world order”. She said the White House has gone from “leading global collaboration to using coercion to push their America first agenda”.

She noted that over the past 80 years, since the Second World War, world trade rules have been liberalised and, as a result, hundreds of millions of people have been lifted out of poverty.

“Trade, actually, during the COVID pandemic was a testament to how well we could handle a global event like that. Because of trade, we could develop a vaccine in record time, and we still had everything we needed, being produced and shipped everywhere.

“Global supply chains are the magic that makes it possible for firms to run this intricate web of production across the world, where countries and suppliers can collaborate and make use of cheaper labour and other advantages across the world. This has given us low inflation and a lot of growth.”

Moving onto uncertainty, Norberg said the word that was already at the top of investors minds has been “weaponised”. She explained: “The everyday uncertainty that we are feeling, it stems from weaponising chaos that we’re seeing, and it’s not just an international phenomenon, but it actually starts at home. It starts in DC, and it effects American society in ways that are so deep and so wide it’s hard to wrap your mind around, and it runs on ignorance and on intimidation.”

Norberg said: “The thing with tariffs is that it is a weapon that hurts everybody, but it hurts a country that invokes them the most, and hurts producers, and it hurts consumers, and they hurt small and medium-sized enterprises more than large companies, and it hits poor people more than richer ones. Tariffs increase prices, lower competition and open the door to corruption.

“These tariffs will have visible effects on the US economy. There’s no doubt, and for the first time in my knowledge, financial advisers are in agreement that there is a there is a recession coming, and the risk is more than 50%. Investments in the US have stalled. Shipping is down 40%, flights are down 30% and the export of US agricultural goods have come to a complete halt without any bailout for farmers.”

Even if tariffs were eliminated, the situation would not be rectified overnight. This is because of the prevailing uncertainty across real estate markets.

“Uncertainty is deadly,” she said. “What the actual intended outcome of [Trump’s actions are supposed to be] this is anybody’s guess, but this boiling the ocean approach in trade that the Trump administration has taken, you know, dictating tariffs, questioning national sovereignty, claiming the canals, befriending the enemy, all these things are going to have enormous consequences.”

The changing face of global trade

Norberg recently met with high level officials from 21 countries, including Canada, Mexico, Malaysia, China, Indonesia, Singapore, Australia and New Zealand.

She said: “All these countries have just given up from waiting from the US and [are] finding new ways to collaborate and move forward. We’re finding coalitions of the willing within trade and these discussions were not about tariffs on goods, but rather on what we can do in services and digitally delivered services.”

Furthermore, with the US withdrawing its alignment with Europe, she said there would be opportunies to ramp up discussions on trade and rearmament, especially with Germany giving up its austerity.

“This will have effects on the European economy and military power, and there will be all of a sudden the idea of having another bond market for global buyers with a stable economy and a large enough currency. So to summarise, the consequences of the US changing US policy will be extreme and it will be extensive.”

Norberg concluded by saying that there has been increased investment in Euope, that previously would have gone to the US, meaning that Europe could emerge as a safe haven for investors.

To read the latest IPE Real Assets magazine click here.