Trump's Tariffs Unleash Market Turmoil, Fresh Pricing Fears And Worry About Frozen Deals

The Trump administration’s most drastic implementation of tariffs to date ushered in a day of chaos for commercial real estate as markets roiled, price fears peaked and stakeholders openly worried that sticker shock could paralyze deals, leasing decisions and projects. 

Many in the industry hoped President Donald Trump’s “Liberation Day” of reciprocal tariffs would shine a light on the administration’s trade endgame, one that would ease uncertainty and help them make decisions going forward.

Instead, the dramatic size and scope of the levies — far more sweeping than anticipated — left some feeling more in the dark than ever. 

“We were all kind of waiting for this day in hopes that it would bring that sense of relief or clarity, and I don't think we got either of those items,” said Spencer Levine, president of New York City-based luxury developer RAL Cos. “What we have now is really just a reaction, a global reaction, to a real, life-changing event.”

President Donald Trump levied a minimum 10% tariff on imports from more than 150 countries during a speech Wednesday at the Rose Garden, with some countries facing much steeper charge rates: Vietnam faces a 46% tax, while China will see a 34% levy. China struck back, announcing 34% tariffs of its own Friday.

Trump said the trade policy would usher in a new era of prosperity for America, one that “will pry open foreign markets” and break down foreign trade barriers.

“This will be, indeed, the golden age of America,” Trump said. “It's coming back, and we're going to come back very strongly.”

Markets worldwide plummeted Thursday in reaction to the sweeping measure. 

The Nareit Equity REIT index, which tracks publicly traded real estate owners, was down 3% as of market close Thursday, outperforming the S&P 500 and Nasdaq, which were down nearly 5% and 6%, respectively, the biggest one-day loss for both indices since 2020. 

Hotel and industrial REITs took a particular bashing. The hotel REIT index was down more than 9% while industrial REITs were down from their opening price by over 8%, according to Nareit’s U.S. Global REIT Index Data tracker. Brokerages like CBRE, JLL and Cushman & Wakefield ended the day down about 7%, 7.5% and 9%, respectively.

“People are really concerned,” Levine said. “For those that didn't understand the implications of what this meant to commercial real estate, real estate development and construction prior to today … the impact on the markets has maybe made that a little clearer for them, that this is a global event.”

The most direct implications center on potential impending price spikes for construction materials. Who will bear the added costs, the timeline for implementation and whether the administration will grant any exemptions for particular countries or products is still unknown, sources told Bisnow.

Some of the charge rates exceed 40%, and tariffs vary drastically from country to country.

“Those are really big numbers to add on to your hard costs,” said Andrew McCarthy, the founder of Michigan-based Freshwater Development. “Now you have to figure out where that goes. If it all comes to us and we have to add that on to our number, that's the difference between deals not penciling or you're raising sale prices.” 

Project Management Advisors Vice President of Strategic Operations Danny Harrington said it’s too early to predict exactly how much costs might increase, though he expects price spikes may result in budget overruns and reduced financial feasibility for new developments, adding that “for now, yesterday’s announcement only maintains the uncertainty in the CRE investment landscape.”

But many will now be proactively seeking guaranteed maximum price contracts in hopes of sidestepping unpleasant price surprises.

“Owners are under pressure to act quickly, or risk proposals and pricing not being honored which could further impact investment stability,” he said.

Trump’s tariffs have been something of an on-again, off-again affair, and the president has several times announced broad levies only to reverse himself or pare them back in the days that follow.

But even if tariffs are eventually lifted or modified, there’s no guarantee materials prices will come down as a result — something developers learned during the pandemic, McCarthy said. 

“If history repeats itself, and watching what we've learned over the last five years, when these prices get inflated, it's very hard for them to come back down,” he said.

Some worry those higher prices will put projects on pause or that developers could walk away altogether. Already, tariffs and higher prices are beginning to be blamed for delays and project abandonments.

Snell Properties, a developer in Arlington, Virginia, just this week paused construction of a pair of residential high rises until “market uncertainty stemming from tariff talk and cuts to the federal workforce play out,” the developer told the Washington Business Journal. 

When Intel announced last week that it would delay its Ohio One semiconductor plant in New Albany, Ohio, it cited unpredictable political concerns, including tariffs “applicable to some of our products [that] have affected customer ordering patterns.” 

ConstructConnect’s monthly project stress index, a measure of delayed, on-hold or abandoned construction projects, noted that project abandonments have surged 41% in the first three months of this year and about 9.5% in March alone. The March report notes the increase could be due to near-term material price increases as well as labor shortages and persistently high interest rates. 

“This is bigger than just supply and logistics,” Levine said. “Some projects, do they go forward, or do they wait this out? This has large impacts on the decision-making process that goes into commercial real estate.” 

On the positive side, efforts to bring manufacturing back within U.S. borders are bearing some fruit.

Newmark has tracked $33B+ in new major U.S. manufacturing announcements over just the last 3 months, particularly in advanced manufacturing, said Lisa DeNight, Newmark’s managing director and head of North American industrial research, in a statement.

These moves will have “notable long-term growth impact,” she said, but the overall effect of tariffs will be a mixed bag.

“On the other hand, fast-changing trade policy implementation and persistent uncertainty is causing some major occupiers to pause on large industrial leasing, purchasing and investment decisions,” DeNight said.

It's possible that same uncertainty will also work to CRE's benefit, though, according to David McCullough, principal at McCullough Landscape Architecture.

“It’s easy to observe parallels between the current tariff situation and the tech bubble of 2000,” McCullough said. “During that time, the stock market took a beating while the real estate market remained stable. As we saw during that era, we may start to see investors moving away from volatile stock markets and turning to real estate as a safer long-term investment.”