Commerce Department: Trump's Trade War Is Officially Slowing The Economy
Some of the commercial real estate industry's fears about the effect of President Donald Trump's trade wars are beginning to take shape.
The U.S. Department of Commerce released data on Thursday showing that the country's trade deficit increased in August to the widest it has been in six months, Bloomberg reports. A separate report found that both the export of U.S. goods and import of foreign goods have slowed.
New data that proves that the tariffs on imported goods have slowed the demand for those goods and failed to have the intended effect of shrinking the trade deficit have changed the outlook for the country's gross domestic product. Several financial institutions told Bloomberg they have reduced their GDP growth projections for the rest of the year.
Less investment from foreign capital, whether from further pullback in China or decreased U.S. investment from other countries, will only make it more difficult to cover the increased cost of construction associated with tariffs, RSM Senior Manager Laura Dietzel told Bisnow earlier in September.
Trump's tariffs on steel and lumber imports spiked construction prices earlier this year, and investment from China has dropped due to both the trade war and internal pressure from the Chinese government to curtail outbound capital.
Though trade concerns have been noted by industry experts for months, it was not expected to slow down what has been a historically strong growth period, according to studies by CBRE and JLL.
The Commerce Department's reports come one day after the Federal Reserve Bank increased the short-term interest rate, specifically citing strong GDP growth as its justification. If that growth is weakening, a federal interest rate hike could compound the issue, and with Trump threatening more and stronger tariffs according to CBRE's report, the worst may be yet to come.
“Many businesses are delaying capital investment, and development margins are slim, so project success has a lot to do with appropriately timing the market,” Dietzel said. “You don’t want to be caught in a situation where you're ready to deliver your asset and you find yourself in another recession. It’s that overall uncertainty in the short term that is influencing the true economic impact over the long term.”