Does Donald Trump have a point?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Three weeks ago, amid surging Treasury yields and sizable falls in the dollar, a crisis looked possible - a breakage somewhere in the world's financial plumbing that would rapidly tighten credit availability and further strain real estate markets.
US President Donald Trump peered over the edge and has been stepping back ever since. A trade deal with China is close, Trump and his Treasury Secretary have suggested - claims that China dismisses. Trump followed that up with hints that he may preserve the independence of the Fed - perhaps some norms will hold. Markets have rallied since. Treasury yields are well off their highs.
Still, you’d expect an even more substantial rally amid what appear to be huge pivots in economic policy, and that tells you a lot about where investors think the real damage will come from - faltering business confidence in the face of uncertain policy that results in steep drops in business investment. Because who really knows when we'll return to step one?
Trade Tension
The signs are already there. Of the US companies that have held earnings calls with analysts so far this season, tariffs were cited on more than 90% of them, according to FactSet data shared with the FT. The term “recession” was mentioned on 44% of calls.
This extends well beyond corporate America. UK private sector activity is now falling at its fastest rate in more than two years, according to April's flash PMI from S&P Global. Export orders fell at the fastest pace since the early months of the pandemic. More than 40% of respondents to a separate Reuters UK business poll have cut their growth forecasts.
Wall-to-wall coverage of the volatility swiftly reached the high street. The GfK and Nuremberg Institute for Market Decisions (Nim) consumer confidence barometer fell four points in April to minus 23, the lowest level since November 2023. A lack of clarity will clog the wheels of investment, whether it’s homeowners hesitating to move or institutional investors delaying commercial real estate decisions.
“The worry I hear more often is actually not even tariffs, it is uncertainty,” IMF Managing Director Kristalina Georgieva told reporters Thursday, according to Bloomberg. “Let’s have clarity.”
Embrace a shift
Fine, nobody likes the tariffs or the way they've been implemented... or do they?
"Free trade is a force for prosperity if it rests on a level playing field," Bank of England governor Andrew Bailey hinted during a speech at The University of Leicester. He went further in comments to reporters on the sidelines of a series of IMF meetings in Washington:
“At what point do you say sustained trade imbalances are not consistent with the state of the world we want, and what causes this?” he said, according to the Times. “China has had sustained weak domestic demand, which is [how] it has enabled a big growth in its export manufacturing economy. That is not sustainable forever. There are issues with the way the system is working which pose harder questions about how the system operates.”
After some stringent criticism from the White House, the IMF is also falling into line: “Countries also need to address the imbalances that fuel many of the tensions we see. Among major economies, some countries like China need to act to boost private consumption and ¬embrace a shift to services.”
Both the US and China will likely loosen trade policy soon - the signals are all there and the relief rally will continue, but this isn't going away. Policymakers seem reluctantly united in their view that, with the issue now front and centre, it’s better to tackle it head-on than let it fester.
Bringing it forward
The amount of empty office space across the UK has started to fall for the first time since 2020, according to data shared with the Times. Occupiers took 1 million sq ft more office space than they exited between January and March. Vacancy rates dipping in about 50 per cent of the country’s big towns and cities, the paper reports.
This has been coming for a while. London's vacancy rate has been falling for a year or so. Demand is strong, particularly in areas favoured by financial services firms, which is being compounded by occupiers bringing forward moves in the face of dwindling pipelines. Developers are simultaneously withdrawing older buildings from the market for redevelopment.
We explored many of these issues as part of the London Series. Last year, three quarters of development completions in the City were pre-let by completion. Over the next few years, the team expects that demand in core submarkets will spill into non-core locations where there is availability at lower occupancy costs.
In other news...
Incredibly, developers didn’t start a single home in all but ten of London's boroughs during the first quarter. Oliver Knight takes a deep dive.