Navigating Tariffs: Economic Growth, Inflation and CRE Outlook
Tariff Announcements Introduce Economic Uncertainty
- This past week, the U.S. announced significant tariff increases on Canada, Mexico and China
- Canada and Mexico each negotiated 30-day delays, while China retaliated with tariffs on American goods
- Potential trade wars with Canada, Mexico and China could impact economic growth and inflation in the U.S.
Economic Growth Under Pressure; Inflation Risks Heightened
- Tariffs could slow U.S. GDP growth to 0.7% to 1.8% in 2025, down from the 2.2% forecast
- Inflation could rise by 0.5%, pushing it back to the 3.5% range
- Higher inflation could prevent the Federal Reserve from cutting interest rates
Commercial Real Estate Faces Indirect Headwinds
- Industrial and retail sectors may see reduced space demand from tenants as consumer spending declines
- Higher construction costs could slow multifamily housing development
- Limited new housing supply may support rent growth, but it also increases the risk of regulatory actions such as rent controls
As of 2022
Sources: Marcus & Millichap Research Services, The Observatory of Economic Complexity
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