Trump 2.0: The First 100 Days | Canada

Tariffs Create Stagflation Shock in 2025

Impact on CRE

Canada

• A good rule of thumb for how the tariffs affect the economy is that for every one percentage point increase in the effective tariff rate, real GDP falls by 20-25 bps and the CPI increases by 6 bps. • The main hits to GDP come from higher prices causing consumers to buy less, reduced trade with the U.S., tighter margins at importing firms, and tighter financial conditions related to recession risks and uncertainty effects. • The hit to inflation comes from higher import prices and higher input costs, some of which get passed on to consumers. • The end result is near-term stagflation, meaning weaker economic growth (or mildly negative growth) and higher inflation. • What it means for CRE? Weaker growth = weaker demand for space. Higher inflation = complicated decisions for the Bank of Canada.

Stag…

…flation

3.0

3.0

2.8

2.5

2.6

2.0

2.4

2.2

1.5

2.0

1.0

1.8

1.6

0.5

1.4

0.0

1.2

-0.5

1.0

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

Real GDP, AR%

CPI, YOY%

Source: Cushman & Wakefield Research, Consensus Forecast

Cushman & Wakefield

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