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The Real Estate Industry Needs The U.S. Trade Deficit Trump Hates

President Donald Trump

President Donald Trump wants to cut the United States' trade deficit with China by $100B, but reducing the trade deficit could damage foreign real estate investment in the U.S.

Any country with a trade deficit has a corresponding amount of foreign investment that offsets the trade deficit within the economy, according to The Real Deal. Real estate has consistently been a landing spot for foreign investment in the United States, meaning a smaller trade deficit for the U.S. would correspond with a decline in real estate value, George Mason University economist Don Boudreaux told TRD. 

As China's trade surplus with the U.S. rose, so did its investment in real estate, with massive deals in New York such as HNA Group's $2.2B purchase of 245 Park Ave. in 2017. With the Chinese government ordering a slowdown of overseas investment, the money spigot's flow is already slowing, and further disinvestment could be devastating for the real estate market, Boudreaux said.

Trump economic adviser Peter Navarro has said shrinking the trade deficit would encourage foreign investment, but Boudreaux dismissed that view out of hand.

“This is like fingernails scratching on a chalkboard to me,” Boudreaux told TRD. “Increasing foreign investment increases the trade deficit. So it’s a logical contradiction.”

Although Trump's tax bill promises a sizable boost for commercial real estate, his threats of trade war could offset those gains. The steel tariff has driven prices through the roof without the mitigating effect of increased domestic production Trump promised.