Posted on April 25, 2017 · Posted in Industrial / Flex, Retail

President Donald Trump’s tough talk on what he has described as other countries’ unfair trade advantages over the US has caused concern among many people in the world of industrial real estate.

They worry the new administration will attempt to rewrite the rules of international trade, and perhaps even start a “trade war” that could curb the import of needed goods.

But Cushman & Wakefield has just published a logistics and industrial research briefing, and concludes that a trade war with China or US withdrawal from NAFTA remain unlikely.

“President Trump says he believes in ‘free trade but also fair trade,’ and as policy details emerge, companies will start looking at their supply chain networks to determine the impact on operating costs,” says Jason Tolliver, head of industrial research, Americas at C&W. “The importance of China, Mexico and Canada as export partners makes withdrawal from the North American Free Trade Agreement or a trade war with China unlikely scenarios.”

C&W notes that the US has complicated trade obligations with 20 countries through 14 free trade agreements. These partners account for nearly 70% of US exports and more than 80% of imports. The researchers also considered the impact of two executive orders Trump signed on March 31. The first calls for tougher enforcement of the mechanisms used against foreign governments that subsidize companies selling goods at below-market prices. The second orders the US Commerce Department to produce a report on every possible reason for the trade deficit within 90 days.

But C&W’s research weighs the impact of trade with China – the US’s second largest trading partner and its third largest export market as well as a driver of the industrial-related warehouse demand in this country – and concludes that China remains too important to engage in a trade war.

“China’s growing consumer class will exceed the entire US population by 2026,” says Tolliver. “Similarly, when you consider the impact of increased cross-border trade flows between Canada, Mexico and the US since NAFTA, it seems unlikely the US would withdraw. Both the Canadian and Mexican governments have said NAFTA needs an update.”

However, the C&W report notes that US trade with Canada and Mexico has increased more rapidly than with any other countries since the signing of NAFTA in 1995, and US warehouse inventory has increased by a net of 3.5 billion square feet.

 

Source: GlobeSt.

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