Trade wars and real estate: How tariffs and tensions could shape the global property market

In March 2025, US President Donald Trump imposed significant tariffs on America’s three most important trading partners: Canada, Mexico, and China. The administration levied a 25% tariff on imports from Canada and Mexico (10% on Canadian energy) and doubled the tariff on Chinese goods from 10% to 20%. All three countries swiftly retaliated.

The White House followed up with a 25% tariff on all steel and aluminium entering the US, leading to immediate retaliatory tariffs from Canada and the EU. Tensions flared following the measures and countermeasures, raising fears of an escalating trade war.

What comes next is uncertain. Trump will likely continue to use tariffs to pursue his policy agenda, but compromises could be reached. Even so, we seem to be entering an era of higher tariffs.

The implications of these tariffs extend far beyond trade. They could have wide-reaching ramifications for the global real estate market, affecting everything from demand and construction costs to monetary policy and currency dynamics.

As the world braces for the potential fallout, understanding these impacts is crucial for investors, developers, and property professionals. We take a look at how rising trade tensions could impact the international property market.

Slowing global growth could weigh on demand

Trade wars often lead to economic slowdowns, which can weaken demand for property – both domestically and internationally.

It could also impact buyer behaviour and the flow of foreign capital as the shifting economic landscape impacts nations in different ways. American, Canadian, Mexican and Chinese buyers may be less inclined to invest overseas if those countries’ economies take a hit.

Meanwhile, if other economies fare better or even benefit from the shifting flow of trade and capital, we could see increased demand from some parts of the globe.

The UK, for instance, is expected to be relatively insulated from US tariffs. Meanwhile, countries like Vietnam, India and South Korea enjoyed increased trade and investment following Trump’s first-term tariffs on China, so they could benefit once again.

Nevertheless, overall activity in the global real estate market could decline, and certain sectors may be more vulnerable than others. Residential demand could fall in cities reliant on foreign buyers, while commercial and industrial property markets may suffer if companies delay expansion plans due to economic uncertainty. Developers, particularly in emerging markets, could face difficulties attracting foreign capital if investor confidence weakens.

Higher material costs may drive up prices

In mid-March, Trump went ahead with 25% tariffs on all steel and aluminium entering the US, with ‘no exemptions, no exceptions’. His tariffs on Mexico and Canada are also set to hit softwood lumber and concrete – two more key homebuilding materials.

The construction industry is highly sensitive to material costs, and tariffs could significantly impact building expenses. This may lead to increased costs for residential and commercial developments, potentially reducing new construction activity.

Developers could be forced to pass on these costs to buyers, further cooling the market, and existing projects could need new budgets drawn up as costs escalate.

In addition, there are regional differences in the US when it comes to reliance on imported construction materials. Therefore, some states could struggle more than others.

Conversely, the EU may benefit from cheaper Chinese imports, potentially lowering construction costs and stimulating development in certain regions.

However, supply chain disruption and geopolitical instability could still create volatility in material pricing around the world, making it harder for developers to plan long-term projects with certainty.

Monetary policy divergence could influence activity

The impact of tariffs on inflation and economic activity could lead to diverging monetary policy approaches among the world’s central banks. This, in turn, could affect financing.

Donald Trump’s tariffs may drive up inflation in the US, potentially forcing the Federal Reserve to maintain higher interest rates. This would make mortgages and real estate financing more expensive, possibly dampening housing market activity and reducing affordability for buyers.

In contrast, China may respond to American tariffs by selling more of its cheap goods to Europe, essentially exporting deflation, while US tariffs on the EU could hurt the Eurozone’s struggling economy.

As a result, the European Central Bank (ECB) may cut rates faster and further than its global counterparts, encouraging borrowing and investment in property. This monetary policy divide could influence capital flows, with investors seeking real estate opportunities in markets with more favourable lending conditions.

However, it’s worth noting that there’s huge uncertainty surrounding the monetary policy outlook. The impacts of tariffs on growth and inflation are unclear, and Trump’s approach to policy adds another layer of unpredictability.

Safe markets could outperform riskier ones

With the increased uncertainty and fears of a global slowdown, anxious investors may move away from riskier real estate markets in favour of safer investments. Prime locations in stable economies – such as London, New York, and Zurich – could see sustained demand as capital shifts away from riskier assets.

Likewise, high-net-worth individuals and institutional investors may look to hedge against economic instability by placing funds in resilient property markets with strong legal frameworks and stable currencies.

Popular European countries – such as Portugal, Spain, and Germany – could remain attractive to investors seeking safer markets. Singapore is also a perennial safe haven, along with major cities around the world such as Sydney, Tokyo, Toronto, Geneva and Dubai.

Conversely, emerging markets with higher exposure to trade volatility may experience capital flight, leading to slower property price growth and reduced transaction volumes. Riskier markets in Asia, Africa and South America could become less attractive.

FX and international transfer dynamics

Tariff and trade tensions will also drive movement in the FX market, and currency fluctuations play a crucial role in shaping international real estate investments.

As currencies rise and fall in value, the impact on purchasing power could affect the volume and flow of cross-border transactions. Currency markets are notoriously volatile, so we’re likely to see this shift as the situation evolves.

It’s possible that the US dollar could weaken in the short term as tariffs hit the US economy but rebound in the second half of 2025 as supply chains adjust. If tariffs do lead to higher interest rates, as discussed earlier, then this could support the US dollar. Americans with greater purchasing power but facing higher borrowing costs at home may opt to invest overseas.

That said, USD's outlook is increasingly uncertain. There are fears that rising inflation could put the Federal Reserve at loggerheads with the Trump administration, as the latter has long argued for lower rates. This, paired with the negative impact of tariffs, could spell trouble for the US dollar.

Meanwhile, a weaker euro – due to a struggling economy and more accommodative monetary policy – could erode the purchasing power of European investors looking to buy abroad. This may mean less outward investment from the Eurozone into other markets but more inward foreign investment in European real estate.

Likewise, emerging-market currencies (like the Brazilian real and South African rand) as well as other risk-sensitive currencies (such as the Australian and New Zealand dollars) could weaken due to USD strength and global risk aversion.

Amid the potential for heightened volatility, real estate buyers, sellers and investors will need to closely monitor FX markets to capitalise on currency-driven opportunities and mitigate risks associated with volatile exchange rates.

Uncertainty ahead

As global trade tensions escalate, the real estate market faces a period of heightened uncertainty. Investors and developers must navigate shifting demand dynamics, rising construction costs, divergent monetary policies, and currency fluctuations. While some markets may benefit from the evolving landscape, others could see slower growth or increased volatility.

For those looking to invest in property, understanding these macroeconomic trends will be critical. Whether adapting to rising material costs, seeking opportunities in stable markets, or leveraging FX movements, strategic decision-making will be key in an era of trade wars and economic realignment.

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