Countries had until July 9 to make trade deals with the United States or face steep tariffs. However, President Donald Trump pushed the effective date to Aug. 1.
As such, it’s no surprise that Marcus & Millichap Senior Vice President John Chang commented that investors identified two issues involved with decision-making: Interest rates and overall uncertainty due, in part, to the whiplash tariff policies in place since “Liberation Day” in early April.
The Ongoing Tariff Muddle
In Marcus & Millichap’s recently released video, “The Eye of the Storm: Interest Rates, Tariffs and Uncertainty,” Chang explained that in some cases, tariff bluster is becoming background noise with uncertainty somewhat reduced.
“Most economists anticipate that the tariff rates will continue unchanged. But President Trump recently leveraged the threat of raising tariffs to force Canada to change a recent digital tax policy,” he said.
The result? “It’s entirely possible that tariffs could be changed on short notice,” Chang observed. “If that starts to happen, uncertainty could begin to rise again.”
Then, There’s the OBBB
The “One Big Beautiful Bill” was signed into law on July 4 after being pushed through the House and Senate (where it narrowly passed). Chang acknowledged that issues like Medicaid funding reductions could raise uncertainty. Furthermore, because the “bill went through Congress at lightning speed, there will undoubtedly be some facets that need additional interpretation, like we experienced when the 2017 Tax Cuts and Jobs Act was quickly shuttled through Congress,” he said.
Additionally, the bill increases the U.S. budget deficit by approximately $3.3 billion over the next decade, leading Congress to raise the debt ceiling to $5 billion. “That means more Treasuries will be issued over the next few months, which could put upward pressure on rates,” Chang said.
At the same time, Chang added, the Federal Reserve and foreign investors are buying fewer Treasury holdings, meaning that the new issuances could lead to higher interest rates.
The Impact on CRE
“I’m not saying that uncertainty will surge or that interest rates will definitely run up, but the probability of these risks are things we need to consider as investors,” Chang noted. As the tariff policies stabilize and OBBB gains clarity, “hopefully the uncertainty will be a short-term headwind,” he added.
One positive note is the 100% bonus appreciation offered by the OBBB. Chang said this tool could help improve first-year returns on new acquisitions. Additionally, “the real estate outlook remains positive, as healthy demographics and the durability of the U.S. economy will eventually play through,” he added.
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