How would Trump’s New Tariffs affect the Real Estate Investor in the United States?

As former President Donald Trump eyes a return to the White House in 2025, his economic platform includes a sweeping set of new tariffs that could disrupt industries across the board—including real estate. While tariffs are typically associated with manufacturing and international trade, their ripple effects often extend to sectors not immediately obvious. For real estate investors in the United States, these proposed changes could reshape project feasibility, investment strategies, and portfolio performance in unexpected ways.

So, how exactly might Trump’s new tariffs affect U.S. real estate investors? The answer lies in understanding the deep interconnection between trade policy and domestic economic variables—especially construction costs, borrowing rates, commercial leasing activity, and foreign capital flows.

Let’s dive into the four critical areas where the real estate investment landscape could see the most significant impact.

1. Increased Construction Costs

At the top of the list is the likely spike in construction costs. If Trump’s proposed tariffs target imports such as steel, aluminum, lumber, and other building materials—as they did during his first term—real estate developers could see their material costs skyrocket. These tariffs would apply to a wide range of products from countries like China, potentially leading to price increases of 10% to 25% on key construction inputs.

Historically, tariffs on imported steel and aluminum under the Trump administration in 2018 led to measurable cost increases across infrastructure and real estate development projects. A similar approach in 2025 could once again make ground-up construction less economically viable.

For real estate investors, particularly those engaged in new development or large-scale renovation, this translates into thinner margins and longer timelines. Budget overruns become more likely, forcing investors to make tough decisions—whether to postpone developments, scale down projects, or pass increased costs on to buyers and renters.

Moreover, higher construction costs may dampen housing supply in high-demand areas, further inflating property prices and complicating affordability. This is particularly concerning for multifamily housing and affordable housing developers, whose budgets are already constrained.

Key takeaway: Investors must brace for tighter profit margins and should explore alternative materials or modular construction methods to mitigate rising material costs.

2. Elevated Borrowing Costs

Another potential impact of new tariffs is their indirect effect on interest rates and borrowing costs.

Tariffs can act as a tax on the economy, leading to higher consumer prices and contributing to inflation. If tariffs drive inflation upward, the Federal Reserve may respond by raising interest rates to cool down the economy. While the Fed operates independently, historical trends suggest that persistent inflationary pressure—particularly due to import costs—will influence its monetary policy decisions.

Higher interest rates directly affect real estate investors by increasing the cost of capital. Loans for acquisitions, refinancing, or construction become more expensive, decreasing project viability and net returns. Even a 1% increase in interest rates can significantly reduce a property’s internal rate of return (IRR), especially in high-leverage investments.

Increased borrowing costs also tend to suppress buyer demand, as individuals and institutions become more cautious about financing expensive properties. This creates downward pressure on property values and could result in a more sluggish sales cycle.

Smaller investors, in particular, may find themselves squeezed out of opportunities that previously made sense on paper. Portfolio optimization and cost control become crucial strategies for maintaining profitability in a high-interest environment.

Key takeaway: Investors should stress-test their portfolios against rising interest rate scenarios and consider locking in favorable loan terms before potential hikes take place.

3. Slowed Commercial Leasing Activity

Tariffs don’t just affect developers and lenders—they also impact the end-users of commercial real estate, such as retailers, manufacturers, and logistics companies. If tariffs raise input costs for these businesses, they may respond by cutting back on expansion plans or downsizing operations, leading to decreased demand for leased commercial space.

Retailers relying on imported goods may face shrinking profit margins, prompting closures of underperforming locations or halts on new store openings. Industrial tenants—particularly those in manufacturing or warehousing—could pause leasing decisions as they reassess supply chains, margins, and operational costs.

The result? Higher commercial vacancy rates and downward pressure on rental rates, particularly in sectors like retail, industrial, and flex space.

Office leasing could also feel the pinch. If corporate tenants face broader economic uncertainty stemming from trade wars and higher costs, they may delay leasing decisions or reduce their spatial footprint altogether—a trend already accelerated by hybrid work models post-pandemic.

Real estate investors with significant exposure to commercial leases—especially in import-dependent regions or sectors—should prepare for increased tenant turnover, longer lease-up periods, and potentially higher concessions to attract and retain occupants.

Key takeaway: Investors should diversify their commercial property holdings and prioritize tenants with strong domestic supply chains and resilient business models.

4. Decreased Foreign Investment

Foreign investment has long played a critical role in the U.S. real estate market. Cities like New York, Los Angeles, Miami, and San Francisco have seen billions of dollars in capital from overseas buyers—particularly from Asia and the Middle East—seeking safe-haven assets. However, rising geopolitical tensions and protectionist trade policies like new tariffs can significantly cool foreign investor sentiment.

Trump’s earlier administration already saw a dip in foreign investment due to a combination of visa restrictions, trade conflicts, and regulatory barriers. Renewed or expanded tariffs could exacerbate these challenges, creating an environment where international investors feel unwelcome or at risk.

Furthermore, if tariffs destabilize global trade and increase currency volatility, foreign investors may shift focus to alternative markets perceived as more stable or welcoming. This could be especially damaging for high-end residential and commercial sectors that often rely on foreign capital to support premium valuations.

In addition, the lack of foreign demand could reduce liquidity in key markets, making it harder for investors to exit projects or sell luxury assets at a premium. The result may be a correction in prices in top-tier markets, especially where domestic demand alone cannot sustain high values.

Key takeaway: Investors should monitor foreign capital flows and consider focusing on markets with strong domestic fundamentals rather than overrelying on international demand.

Preparing for a Shifting Real Estate Landscape

While Trump’s proposed new tariffs may aim to protect American manufacturing and jobs, they come with wide-reaching consequences for real estate investors. From escalating construction costs to costlier financing, from slower leasing activity to reduced foreign investment, the potential impacts span every stage of the real estate investment lifecycle.

As we approach 2025, investors need to develop agile strategies to weather these possible changes. That means revisiting underwriting models, building in cost contingencies, exploring local sourcing and alternative financing, and staying closely informed on macroeconomic policy shifts.

Above all, vigilance and flexibility will be key. While tariffs may bring challenges, they can also reveal new opportunities for those who adapt quickly. In a transforming market, the most successful investors will be those who not only react—but prepare.