The economy continues to absorb rapid changes as President Trump implements 25% tariffs on Canada and Mexico and doubled tariffs on China to 20%. These three markets represent 41.5% of total U.S. imports.
This could create some challenges, including elevated inflation and potentially slower economic growth, said Marcus & Millichap national director of research and advisory services John Chang. He pointed to updated numbers coming out of the Atlanta Federal Reserve Bank forecasting a GDP net loss of 2.8% for the first quarter.
Noting the tariff situation is fluid, Chang said the bigger challenge to the U.S. economy is the cloudiness that comes with changing policies. The uncertainty index has reached its second-highest level in history, trailing only the pandemic period.
“It's higher than the Global Financial Crisis. It's higher than the last time we had a government shutdown,” said Chang. “That uncertainty creates a variety of challenges, including indecisiveness by businesses and decision-makers, but it also creates a lot of volatility in the financial markets.”
The CBOE Volatility Index (VIX) is moving around a lot, escalating quickly as the stock market fell last week before partially correcting, said Chang.
The news isn’t all bad, however. That uncertainty and volatility in financial markets often cause investors to move to more secure assets, including real estate. Inflation, the other byproduct of tariffs, also causes a migration of capital into hard assets, he said.
“We have to remember that there are different parts to the story and that the movements may be going one direction for one part of the economy, but cause a reaction in another area of the economy, or in the businesses that are associated with it,” said Chang. “That could result in some increased momentum for transaction velocity. There are some challenges ahead, but that doesn't mean it's bad for real estate and investors.”