As Trump steps back from the brink of a global trade war, what next?

We have seen plenty of grandstanding from the US president already this year but nothing on the scale of the tariffs threatened – then paused for most – this week.

Just days ago, Donald Trump urged Americans not to be ‘PANICANs’, adding that “sometimes you have to take medicine to fix something”, prompting Trump backer Bill Ackman to warn that the tariffs could plunge the US into “a self-induced, economic nuclear winter”.

Whether Trump heeded that warning or always intended to revert to 10% tariffs for all bar China, which at the time of writing was facing an eyewatering 145% tariff, only he knows. But while he has stepped back from the brink of a full-on global trade war, 10% is still significant, the pause is just that, a pause (of 90 days), and the fear of a global trade war and recession remains – and what does fear do? It leads to uncertainty – which never bodes well for the real estate industry.

In terms of investment, the outlook could not be more uncertain. Last month, the BPF published the findings of a new annual report tracking overseas investment into the UK, showing that the US is the biggest investor in UK commercial real estate, deploying £13.6bn in 2024 – more than double the amount it spent in 2023 (and accounting for a third of all investment into the UK).

Will US investors, who’ve already been warned off anything ESG or DE&I related, feel compelled to pull up the drawbridge and look for opportunities close to home? Or, if the pound loses value against the dollar, will it make the UK more appealing to US investors, who may – like other overseas investors – also be attracted by the UK’s status as a relative safe haven?

Your guess is as good as mine. Another unknown is the impact a weaker global economy would have on investment flows from other parts of the world into the UK, which will be reliant on those sources if the US does scale back its activity.

Further uncertainty surrounds the impact of Trump’s call to companies to move to the US and “DO IT NOW!” US carmakers cannot just restructure their businesses and relocate manufacturing overnight, if at all. Is Trump really saying that there should be no regional production in its overseas markets and that all cars produced for other jurisdictions should be manufactured in the US and exported? Also, US carmakers rely heavily on imported parts. Would these have to be sourced domestically?

And what about other US-owned companies? Are they supposed to relocate to the US or reduce their headcounts and office space in overseas markets? What impact will the tariffs have on global supply chains and the industrial and logistics sector? The UK is still reeling from the impact of Brexit. The impact of ‘Amexit’ would be on a whole other level.

There are so many unanswerable questions. Where there is a degree of certainty, but not of a positive nature, is around costs. The tariffs will inevitably lead to higher building material and construction costs, which will put additional pressure on a sector already contending with wafer-thin margins, reduce development activity and torpedo any prospect of hitting housing targets.

Of course, what happens to the UK or anywhere else in the world is of little interest to many Americans, and Trump’s policies have reportedly boosted his popularity at home. Most will change their tune when they start to feel the financial pain, which they will.

In the meantime, world leaders face a stark choice: put up with Trump’s mockery and spend the next 90 days begging for a trade deal or, as Keir Starmer suggested, try to keep a cool head – which is easier said than done when dealing with the most hot-headed and powerful man in the world.

As for the rest of us, we should be praying the 2020s are not a repeat of the 1920s, which also started in the grips of a pandemic (the Spanish Flu), saw the rise of the far right (in Germany) and witnessed a global economic downturn (sparked by the Wall Street Crash).

Given Trump’s trade warmongering tactics with China, another decade that the 2020s is starting to share striking parallels with is the 1950s, when the communist Soviet Union rather than China was America’s greatest fear, the nuclear threat was a literal not an economic one and the terms DE&I and ESG did not exist – just as Trump would have us believe they shouldn’t today.

The difference is that they do exist, if increasingly in name only. The warning signs are there… and more worryingly, here.