Tariff discussions between Canada and the United States have been fractious, to say the least. As of this writing, Canada has issued retaliatory tariffs totaling more than $20 billion on U.S. imports in response to Section 338 tariffs on Canadian goods that were formerly tariff-free under CUSMA.

While exposure remains a concern, Cushman & Wakefield said it is uneven across the United States.

In its recently released report, “The Scale of It All: Updates on the Most Recent U.S.-Canada Tariffs,” Cushman & Wakefield measured the location quotient (LQ) of tariff-weighted bilateral imports based on their composition versus overall import volume.

The result? “States like Maryland, Kentucky, Texas and Michigan have tariff-related exposures well above the North American average,” the report said. The reason is that the states’ import mix relies on heavily tariffed products, including automotive and vehicle parts in Michigan and Texas and aluminum products in Kentucky and Maryland.

However, that exposure isn’t necessarily weighing down the states’ economies. Trade accounts for 0.6% of Maryland’s gross domestic product and 1.5% of Texas’ GDP.

At the same time, “many Canadian provinces have lower tariff-weighted exposure, but trade with the U.S. represents a much larger share of their economies,” according to the report.

What It Means for CRE

The uneven exposure could have several implications for commercial real estate.

• More 3PL demand. Third-party logistics companies could experience increased volume as retailers, wholesalers and manufacturers respond to tariffs with just-in-case (JIC) strategies designed to create inventory buffers.

• Bonded warehouse demand. Companies could rely on bonded warehouse strategies to delay tariff payments, even as available bonded warehouse space has been limited since last year.

• More onshoring. U.S. onshoring, as well as Mexico’s appeal, could accelerate as companies seek substitutes for Canadian-sourced production, particularly in the automotive sector.

• Higher development costs. Tariff-related material-cost inflation could offset some of the demand upside from reshoring, potentially pushing developers toward higher-conviction projects rather than speculative builds.

Cushman & Wakefield also indicated that the U.S. midterm elections could “provide an important signal on the durability of the current trade-policy regime.” Potential changes in political support could influence tariff policy, while ongoing uncertainty is likely to weigh on supply chains and business investment throughout North America.

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