Peter Linneman On Trump's Tariffs, U.S. GDP Growth And CRE Debt Coming Due In 2025

When Peter Linneman, economist and former professor at the Wharton School of the University of Pennsylvania, said last spring that the Federal Reserve would make three interest rate cuts by the end of 2024, Walker & Dunlop CEO Willy Walker said if that happened he would “kiss his feet.”

Sure enough, Linneman’s predictions came true when the Fed made its third consecutive interest rate cut on Dec. 18. So on this week’s Walker Webcast, live from Philadelphia, Walker did just that.

“I chose this brand new pair of shoes just for you,” Linneman said.

Jokes aside, Walker and Linneman quickly dove into the numbers, with Walker recapping Linneman’s economic predictions for 2024, assessing the accuracy of his scorecard. 

While Linneman was correct in his prediction of crude oil pricing hitting $68 to $70, some of his other forecasts came up short, including GDP. He had predicted GDP would remain at 2.5%, but it rose to 2.8%. Similarly, he had forecast 6% to 7% growth in the Dow Jones Industrial Average, but it reached 13%.

Walker reminded Linneman that he had stated that predicting growth well beyond 7% would have been “silly.”

“My comment to you is you should have been more silly,” Walker teased his guest.

Linneman also detailed his observations further in the most recent edition of The Linneman Letter.

About 30 to 50 basis points of the country’s GDP growth can be attributed to the war in Ukraine, Linneman had written in his newsletter. This is largely because the U.S. is the No. 1 producer of oil and gas in the world.

“Our exports went up substantially,” he said. “Secondly, we're a major, major agricultural exporter, and Ukraine and Russia were cut off from a lot of the export market. You do the math.”

Linneman’s newsletter also predicted 30 to 60 basis points of additional GDP growth from a Trump presidency versus a Harris presidency. Now that Trump is set to be inaugurated on Jan. 20, GDP growth isn’t the only change Linneman predicts from a Trump presidency. Deregulation is almost certain to occur, which could be a plus for small businesses that have limited resources, Linneman said.

Expressing concern that with the stroke of a pen, President-elect Trump could disrupt the labor markets or increase tariffs significantly, Walker questioned whether Trump’s potentially quick, short-term actions could hold the U.S. back from an economic standpoint. 

Linneman, however, isn’t terribly worried.

“Washington doesn't do much of anything fast, and you say ‘executive orders,’ but it then has to be administratively implemented,” Linneman said. 

If President-elect Trump were to implement every tariff he’s mentioned, that would take the U.S. back to 1967-level tariffs, Walker said, reading from Linneman’s recent newsletter. He noted that this may be viewed as “overly burdensome” from today’s point of view, but according to Linneman, this isn’t a make-or-break situation. The world functioned in 1967, and it will function again if these tariffs are implemented. 

“It's not like we’ll go spinning into outer space,” Linneman said. “I'm not saying it's great, but the world will function. Tariffs are not going to save a dying company. They're not going to save a dying industry. If we're not better, cheaper or faster, it's just a matter of time.”

What’s interesting about Trump’s approach to tariffs, however, is that he views them as a “general negotiating tool” to navigate social agendas, Linneman said. 

“Let's suppose he raised tariffs on Mexico, and it actually did have some impact on the drug cartels,” he said. “That would be a good thing. That would [also] be worth some price if in fact you got Europe to defend itself a bit more. That would be a good thing, but it would come at the price of the tariffs.”

Moving the discussion toward commercial real estate transaction volume, Walker said the amount of outstanding debt in 2025 is estimated to be in the ballpark of $900B. This may seem like a hefty price tag, and compared to previous years, it is, Walker said. 

It’s estimated that from 2023 to 2025, anywhere from $250B to $350B of CRE debt was deferred annually, Walker said. This has led to a compiling effect where a massive amount of debt is due to mature this year. 

In their bank earnings earlier this morning, Wells Fargo and JP Morgan crushed it, Walker said. But interestingly enough, commercial real estate, which was mentioned heavily in past earnings for the last two years, was not mentioned by either of them. 

Walker questioned whether or not the market has bottomed out as it relates to credit and also wondered if banks will start to call these loans to get liquidity into the market — or if they’ll continue to “extend and pretend.”

Linneman said that banks will continue to kick the can down the road in hopes that properties that may not be performing as well as they once were, such as office assets, will regain some footing in the near future.

“They say they're due this year, but they're not,” Linneman said. “They're due when the property functions.”

One particular area in which Linneman is bullish is Washington, D.C., metro region commercial real estate. When asked why, Linneman said that it’s simple: The market grows no matter who’s in office. 

Even with the new Department of Government Efficiency proposing to slash federal spending, Linneman remains bullish on the market.

“​​I think the biggest thing [DOGE] could do is put pressure on Congress to care about how they spend money, which they haven't done for decades,” he said. 

Subscribe to get invites, replays and articles for new Walker Webcast episodes every week.

This article was produced in collaboration between Studio B and Walker & Dunlop. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.