Blackstone’s transaction activity dipped in the first quarter as President Donald Trump’s trade war has lowered the temperature across U.S. capital markets just as things were beginning to thaw.

The firm’s first-quarter realizations, or profit-generating trades, for its real estate business fell 65% compared to last year to just $4.3B. The slowdown led to a 25% drop in distributable earnings from the last quarter.

Blackstone President Jon Gray said that market activity could rebound if the president finds a way to resolve the trade war he started.

“Faster resolution of the tariff diplomacy will lead to better outcomes for the real economy and markets,” Gray told Bloomberg.

The investment giant’s first-quarter performance was buoyed by its other business lines. Capital inflows totaled $62B in the first three months of the year, the highest level in nearly three years, CEO Stephen Schwarzman said in a statement.

Blackstone is sitting on roughly $177B in dry powder and Gray said the investment firm sees opportunity in the uncertainty that pervades markets.

“When prices reset lower we think of that as an opportunity,” Gray told Bloomberg. Given the focus on imports right now, Blackstone was also taking a cautious approach to deals for businesses with exposure to physical goods, Gray said.

Schwarzman said Thursday that the firm saw tariffs as a potential tailwind for its real estate portfolio.

“In real estate, specifically, tariff effects are likely to drive up construction costs and further reduce new supply, which is supportive for real estate values absent recessionary conditions,” he said on the earnings call.

Blackstone’s real estate business attracted a proportionally small amount of new capital, with inflows totaling $6.1B in the first quarter. Gray said investors were likely to continue taking a cautious approach to real estate in the current economic climate.

“My gut is this period of time may slow some of the movement towards real estate,” Gray said. “But as this recovery begins to take hold, I think you'll see the capital flow back.”

Across all of its business lines, Blackstone reported $1.2B in first-quarter profits, lower than $1.6B a year earlier. Its total assets under management was $1.2T at the end of March, and the firm repurchased roughly 200,000 of its shares across the quarter.

The performance of Blackstone’s real estate investments lagged behind its other business lines in the first quarter. Its opportunistic investments saw 0.2% value appreciation in the first quarter but are down 3.7% over the last 12 months. Its core-plus assets returned 1.2% in the first quarter but are only 0.1% above their valuation in March 2024.

Blackstone deployed $36B on real estate acquisitions across the quarter, while realizations totaled $25.5B.