Trump's Trade War Tests Canada's Longtime Obsession With U.S. Assets

International investors poured $21.3B into U.S. commercial real estate in 2024, more than a third of which came from its neighbor to the north. Canadian investors, who put $7.8B into U.S. real estate last year, have always been the linchpin of foreign capital flows to the U.S., far surpassing any other country. 

But President Donald Trump has used his first six weeks in office to upend trade policy, including by lashing out at Canada with tariffs and acerbic comments about perceived slights. The rhetoric from the White House raises the specter that the flow of international cash to commercial real estate could become collateral damage in the administration’s push to rebalance global trade. 

“It's not a full-scale collapse yet, and who knows if it even will be? Even if all the signs were there for just a complete collapse, it wouldn't have happened yet, because it's just happening too quickly,” said Jim Costello, chief economist at MSCI Real Assets. “We will really know the true impact of all this uncertainty by midyear.”

Canadians’ patriotism has swelled amid the bruising tit-for-tat trade war. American liquor has disappeared from store shelves as a movement to buy Canadian goods takes hold. And the country’s largest pension funds, key sources of capital flows to the U.S., are also facing pressure to spend their cash domestically. 

Canadian firms have invested some $73B in U.S. commercial real estate since 2019, according to data provided by JLL. That’s four times more than any other country, with the other leading sources of capital — Germany, Singapore and Australia — each investing between $11B and $16B in U.S. real estate over the last five years. 

Annually, total foreign investment accounts for anywhere from 5% to 15% of total transaction volume. Canadian investors have made up more than a quarter of that activity since 2019, peaking in 2023 with more than half the share of foreign capital invested in the U.S.

“Canada is a wealthy country, they have balanced budgets, they have big pension schemes for workers, and all of that creates a pile of money that needs to be invested into something,” Costello said. “With the population base basically the size of California, you've got wealth with only a handful of markets to be dealing in, so they have to look for something someplace else.”

The U.S. and Canada remain at odds over trade policy, and Trump continues to double down on his calls to absorb Canada as the 51st state. In an interview on Fox News Tuesday, the president said the country was “one of the nastiest to deal with” when it comes to trade. 

“Canada was meant to be the 51st state because we subsidize Canada by $200B a year,” Trump told Laura Ingraham in an apparent reference to the U.S. trade deficit with Canada, which was closer to $63B in 2024. 

The trade fight with Canada isn’t playing out in a vacuum, and Trump’s early policy moves have increased volatility across the world. The Organization for Economic Cooperation and Development expects the tariffs will drag down the global economy, with growth slipping to 3.1% in 2025 and 3% in 2026.

The OECD forecasts a sharper pullback in the U.S., with growth falling to 1.6% in 2026. But Lauro Ferroni, head of capital markets research at JLL, said a slowdown in global growth, even if it is driven by Trump’s policy moves, could make U.S. assets more attractive to international investors. 

“In a market environment where there is a little bit of heightened noise globally, what tends to come into the foreground is the safe haven status of the U.S.,” Ferroni said. “If tariffs impact, let's say, one of the economies in Western Europe, that is something that could steer more cross-border capital into the U.S.”

While the Trump administration’s early moves have already injected uncertainty into the economy, with U.S. stocks hit especially hard since the start of the year, Ferroni said JLL continued to see growing interest in real estate assets from both inside and outside the country. 

“We're tracking double-digit growth in the number of investors who are bidding on deals,” he said. “The number of quotes from banks, even for loans over $100M, is picking up again. And this is a phenomenon that we've seen as recently as the last one or two weeks.”

Canadian dollars have helped build some recent American megaprojects. Hudson Yards, the $25B Manhattan development from Related Cos., was built with financing from Oxford Properties Group, a Canadian firm that manages the pension fund for retired police officers and city clerks in Ontario. 

PSP Investments, another Canadian pension manager, helped pave the way for the construction of The Wharf in Washington, D.C., with a $200M equity investment in 2014. After a decade as a minority partner, PSP is now negotiating a deal to take full ownership of the 3.5M SF mixed-use project at a $1.8B valuation. 

Canadian firms are active players across sectors and asset sizes. Brookfield Asset Management, the New York-based subsidiary of Canadian conglomerate Brookfield, provided a $176M credit facility this month to a group of investors acquiring 709 single-family rentals in Sun Belt states. 

“Traditionally, cross-border money is just safe, stable capital looking for a rate of return that's a little bit better than bonds,” Costello said. “That's still what a lot of cross-border money is. It's not people coming in swinging for the fences.”

In 2024, eight countries saw at least $1B flow toward U.S. commercial real estate assets, up from just four in 2023. Canada is far and away the main source of capital, while a mix of European and Middle Eastern countries trade positions in the rankings each year. 

Canadian laws in some ways encourage investors to look outside the country’s borders for deals, but there has been a recent push to change the rules to encourage more domestic acquisitions. 

Last year, a group of Canadian business leaders urged the finance minister in an open letter to make it easier for pension funds to invest domestically. The funds are prohibited from owning more than 30% of any Canadian company, but the finance department said in December that it plans to rescind the rule.  

Canadian pension funds owned a combined 28% share of publicly traded Canadian companies in 2000, but that share had shrunk to less than 4% at the end of 2023, the business leaders wrote in the letter. 

It is is too early to tell if Trump’s attacks on Canada and its sovereignty will push the country’s largest investors to reallocate capital, and a political détente between the two allies could win back a nation of famously polite people who have now begun to drown out the U.S. national anthem with boos at hockey games. 

Either way, it will take time for the impacts to be reflected in the data.

“The news cycle is moving faster than the real estate data can catch up,” Costello said.