Fears over a growing trade war between the U.S. and China have been escalating over the past month, prompted by President Trump’s plans to impose a tax on steel and aluminum from China and other countries.
Both sides have threatened to impose tariffs on a variety of other products, creating a volatile stock market environment. On Thursday and Friday, stocks dropped significantly amid a spike in trade war concerns before picking back up on Sunday in response to President Trump’s latest statement:
President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!
These trade disagreements are affecting more than just the stock market, however; U.S. foreign investor real estate sales may also face an uncertain future if these disputes cannot be resolved. While experts do not expect China to hold to its threats, the Trump Administration plans to move forward with its initial plan.
“At this point, most Chinese buyers are cautiously optimistic,” says Carrie Law, CEO of Juwai.com, a Chinese international real estate website. “From all sides, you hear that this trade war is not likely to escalate to the point where it is a serious threat to international trade and relations. At this stage, most property investors seem to feel the trade war will amount to no more than a noisy argument between two friends who later will hug and make up.”
If the pressure continues to build between the U.S. and China, both markets could see an impact on consumer confidence, which could lead to a fall-off in international investing.
“A persistent trade battle that causes doubt and worry in the consumer’s mind could reduce demand for U.S. property,” Law says. “That long-term fear is counterbalanced for now by a short-term incentive to purchase before Sino-U.S. relations possibly get worse.”
The U.S. foreign investor market remains healthy and has not yet shown signs of a slowdown due to trade war concerns.
“I can’t say how much this is due to the trade tensions, but Chinese buyer demand in March was not down, but up, by 26.2 percent on a month-on-month basis,” says Law. “In the first three months of the year, it has recovered from a relatively weak final quarter of 2017. The data is based on the number of property buyer inquiries made through Juwai.”
China plays a large role in the U.S. foreign investor market. According to the National Association of REALTORS® (NAR) Profile of International Activity in U.S Residential Real Estate, total 2017 sales to foreigners were tallied at $153 billion, of which $31.7 billion came from Chinese buyers, up from $12 billion in 2012.
Although the U.S. ranked No. 1 in the nation last year for foreign investment in real estate (according to an annual survey by the Association of Foreign Investors in Real Estate, or AFIRE), numbers for 2018 could drastically change if the U.S. market experiences a dip in Chinese real estate investors.
Stay tuned to RISMedia for more developments.