Trump Imposes Tariffs On China, Mexico And Canada. Here's How CRE Will Be Impacted

President Donald Trump made good on his pledge to enact new tariffs, signing an executive order to implement a 25% charge on goods imported from Mexico and Canada and a 10% charge on Chinese products.

Trump unveiled the new tariffs Saturday, ending weeks of speculation on how aggressive the levies would be and the timing of their launch. News that the tariffs were coming roiled markets Friday and stoked fears that they could translate into higher prices, heightened inflation and retaliatory action from some of the nation's largest trading partners.

Trump has long touted tariffs as a tool to leverage in negotiations with other countries and a means to support American jobs. On Friday, he told reporters he could go further in the future, imposing levies on the European Union and on imports from pharmaceutical drugs and computer chips to copper, steel and natural gas.

“You see the power of the tariff,” the president said. “Nobody can compete with us because we have by far the biggest piggy bank.”

For CRE, tariffs could be a boon for industrial real estate, which stands to benefit from onshoring as a result.

But tariffs on the trio of countries also have the potential to impact construction costs, slow projects for developers and increase housing costs, prompting the National Association of Home Builders to push for an exemption on building materials leading up to Saturday's announcement.

“We respectfully ask that you consider the effects of tariffs on Americans struggling to afford housing,” the industry group said, noting Mexico and Canada alone account for 25% of building materials imports.

Mexico is a supplier of concrete, cement, roofing materials, steel, glass and windows for the U.S., while Canada supplies lumber, aggregates, steel, aluminum and asphalt.

Canada accounts for about 60% of the U.S.’ crude oil imports, though it remained unclear if tariffs would apply to oil. Reports in the Canadian press Saturday suggested government officials there were told tariffs would begin Tuesday and levies on gas and oil would be set at a lower rate of 10%.

China is also the primary source of a substantial amount of materials developers use in construction projects.

Roughly 54% of the world’s crude steel is produced in China, DPR Construction Supply Chain Leader Tim Jed told Bisnow in November. Between a fifth and a quarter of common materials like building stone or cement articles come from China, as does 57% of glazing glass. Aluminum, which companies use in storefront systems and ornamental stairways, is mostly sourced from China.

The tariffs were necessary because of the illegal fentanyl that the countries have allowed to cross the border, Press Secretary Karoline Leavitt said at a Friday press briefing. The White House claims the drug has killed tens of millions of Americans. 

Leavitt didn't provide any details on how the tariffs would be levied, only that they would be available for public inspection at some point Saturday. 

A White House fact sheet issued Saturday states that Trump took action due to the “extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl,” citing a national emergency under the International Emergency Economic Powers Act. 

The executive order notes that tariffs could rise at any time if Canada takes retaliatory action.

When asked if Trump would reverse the tariffs if prices increased for Americans, Leavitt said Trump is intent on effectively implementing tariffs while cutting inflation and costs. She didn't clarify what actions the administration would need to see from these countries to repeal the tariffs.

“Americans who are concerned about increased prices should look at what President Trump did in his first term,” Leavitt said. “He effectively implemented tariffs, and the average inflation rate during the first Trump administration was 1.9%.”

While Trump's stiff first-term tariffs were a win for steelmakers and reduced the U.S. trade deficit with China, other countries like Mexico and Vietnam increased their trade surplus with the U.S. China also responded with retaliatory tariffs on U.S. soybean exports and shifted many aircraft purchases from Boeing to France-based Airbus. 

Some economists and industry players, including the Consumer Technology Association, which represents consumer-facing tech companies, said tariffs could spike inflation and that companies will pass the added costs on to consumers. 

“If you have the type of tariffs that President Trump was talking about, we will have a Great Depression,” CTA CEO Gary Shapiro told NBC News earlier this month. 

One of the highest-profile tariff failures in American history came in 1930 after President Herbert Hoover and a Republican Congress passed the Smoot-Hawley Tariff Act, aiming to protect American farmers and the nation’s economy. The act raised tariffs on thousands of imported goods and is widely considered to have extended the Great Depression — though it didn't cause the onset of the downturn.

Other countries responded in turn, putting up additional restrictions on trade, leading imports to become widely unaffordable and tanking global trade. 

Ronald Rohde Law President Ron Rohde, a Dallas-area attorney specializing in industrial transactions, said the tariffs could bring a mixed bag for the industry.

An increase in construction costs as a result of tariffs could impact the rents developers need to charge for new construction. But labor costs will still be more expensive than import material costs. That means increased costs could hurt new developers but benefit owners of existing property, Rohde said.

“They're going to benefit enough existing CRE holders where the replacement cost goes up or projects get nixed,” he said. “Existing holders are going to see their values go up. They're going to counteract the developers who complain about a lack of cheaper materials input.”