A shifting landscape: Trump's tariffs and APAC real estate
The recent escalation of US tariffs is triggering significant regional supply chain reconfiguration in the region, with investors and occupiers repositioning for multiple scenarios. Christine Li, head of research, Asia-Pacific, Knight Frank, addresses three critical questions that have dominated conversations across the region in recent weeks.
3 minutes to read
1. Given the recent US tariff increases on Chinese imports announced in April 2025, how do you anticipate this will redirect manufacturing investment within APAC, and which real estate markets are positioned to benefit most from this supply chain reconfiguration?
Trump’s tariffs on the Chinese mainland's imports have reached 145%, while those on the rest of Asia-Pacific’s economies range from 10% to 49%. Given the gap, huge incentives remain to circumvent tariffs by re-routing trade away from the Chinese mainland through Southeast Asia and India. For low-cost manufacturing, such as textiles and consumer electronics, we expect the emerging economies in Southeast Asia, particularly Vietnam and India, to benefit from shifting supply chains. However, Thailand and Indonesia will feel the impact of a blanket 25% tariff imposed on all automobile exports into the US. More developed economies, such as Singapore, Malaysia, South Korea, and Taiwan, with capabilities in advanced manufacturing such as pharmaceuticals and semiconductors, and currently exempt from Trump’s tariff, will also gain as manufacturers look for alternative locations. Firms are also adopting China-plus-n strategies to reinforce supply chains by diversifying to multiple locations. Trump's inclination to shift policies on a whim heightens the underlying vulnerabilities of complex global supply chains, which can disrupt sourcing as the cost of inputs and shipping fluctuates. This underscores the need to build more resilient supply chains, creating multiple sourcing solutions to cater to the US and the Chinese mainland markets and remain flexible to changing geopolitical dynamics.
2. With several ASEAN states negotiating preferential trade agreements to capitalise on tariff-driven manufacturing shifts, which emerging APAC markets do you see experiencing the most significant commercial real estate appreciation in the next 12 to 18 months?
Southeast Asia was largely a beneficiary of US-China trade tensions during Trump’s first term. However, this time, wide-ranging US tariffs have not spared the region. While the 90-day pause will give room for several Southeast Asian nations to pursue negotiations with Trump’s administration, the outcome of concessions, if any, remains uncertain. Visibility on pricing, critical in closing bid-ask gaps to facilitate higher deal flow, is missing for now. With business conditions looking muted, investors, remaining selective over commercial real estate investments, are likely to weigh on deal volumes. Exports are expected to contract due to the higher tariffs and logistics properties, which rely heavily on demand from manufacturing firms, are most vulnerable, which could see interest in the sector recede in the near term. There will be nuances across other sectors, but on the whole, investors will be keen to build in a larger margin of safety. This is unlikely to be conducive to any significant price growth.
3. How are institutional real estate investors in APAC adjusting their portfolio allocations in response to the tariff-driven changes in regional trade flows?
Trump’s levies, now abruptly paused for 90 days, have left investors considering how, and if, capital should be deployed. With heightened uncertainty, investors will turn selective, opting for more resilience in portfolio decisions. Investors are expected to increase allocations to the more defensive assets in the alternative space, particularly those in the living sector, as well as data centres, which are shielded from the full force of Trump’s tariffs. In this regard, Japanese assets are likely to remain attractive to global investors. Morgan Stanley is reported to have raised about JPY100 billion for a Japan-focused real estate fund, centred on office and multifamily assets in major cities, as well as logistics and hotels, highlighting investor interest as the country emerges from years of deflation. Global demand for data centres is also likely to remain resilient, fuelled by the onset of next-generation AI models, alongside a potential supply shortage of AI-ready data centres. Offices in India, which have continued to enjoy record leasing volumes, will also appeal to investors looking to weather the current volatility.