Capital Markets: Rally on the front end, but a steeper yield curve could result

If tariffs are ruled unconstitutional, the focus will initially be on trade and manufacturing. However, the more immediate CRE impact would show up in the bond market. Tariffs are more than a trade lever; they influence inflation, interest rates, and how the Federal Reserve sets monetary policy.

Yields on shorter-term Treasuries (2–5 years) would likely compress quickly. Removing tariffs would provide fresh inflation relief, giving the Fed more confidence to cut rates sooner.

The long end of the curve (10- and 30-year Treasuries) may behave differently. Lower inflation supports lower long-term yields, but removing tariffs also reduces federal revenue. Tariffs generate billions annually. Less revenue → larger deficit → more Treasury issuance. More supply means investors may demand higher yields.

Sure, the Fed could step in with another round of quantitative easing—but that just digs a deeper fiscal hole.

We’ve already seen relief, with the 10-year Treasury dipping below 4% at the end of October. Inflation is cooling and GDP growth remains solid. That’s positive for interest rates, borrowing conditions, and CRE transaction velocity. Now we just need the government reopened so we can get the data back to confirm the trend.

Industrial: Rebalancing back to the norm

No sector has been more affected by tariff-era supply chain strategy than industrial real estate. Higher import costs pushed businesses to onshore manufacturing, build up safety stock, and expand warehouse footprints—particularly in inland logistics hubs.

If tariffs fall, that trend doesn’t reverse overnight. But companies may become less worried about supply chain disruptions and more comfortable leaning on imports again. Port markets like Los Angeles, Seattle, Savannah, and Houston stand to gain as import volumes rise. Some inland warehouses may see demand cool temporarily but certainly not collapse. E-commerce still needs space.

Retail: Quiet Relief Behind the Scenes

Retailers won’t celebrate publicly, but they’ll feel the difference immediately. Cheaper imported goods mean lower inventory costs and healthier margins. This is especially meaningful for big-box and discount chains. A reduction in pricing may even be in order fueling consumer spending across all retail categories from food to home goods, thus improving leasing and investment activity. ​

Multifamily: The Benefit Comes Through the Back Door

The apartment market doesn’t depend on tariffs directly, but the construction industry does. And if the cost of steel, glass, and electrical systems drops, suddenly projects that were on hold start to pencil again.

Hospitality: A boost in travel spending

When discretionary goods cost less, households feel modestly wealthier. When consumers feel wealthier, they travel more. No one books a vacation because steel got cheaper — but they do book one when the household budget feels less tight.

Construction: The First Clear Winner

Here’s where the impact is immediate and obvious.

If tariffs are lifted, construction costs will fall— perhaps by 5% to 15%. For a project struggling to pencil under higher interest rates, that can be the difference between “we’re on hold” and “we’re breaking ground. Developers, especially in fast-growing submarkets markets, would feel the wind shift almost instantly.

What’s the Takeaway?

If tariffs fall, commercial real estate benefits, but the gains don’t show up all at once or in the same place. Lower borrowing costs, healthier consumer confidence, and more feasible construction economics would improve fundamentals broadly. Arguments in front of the bench likely won’t result in an opinion until June ’26. There’s a lot of wood to chop to keep the furnaces burning until that decision gets handed down.