Recent tariff tensions between Canada and the United States are reshaping how trade exposure is distributed across North American markets, with potential implications for industrial real estate. Canada has imposed more than $20 billion in retaliatory tariffs on U.S. imports in response to Section 338 tariffs on Canadian goods that had previously moved tariff-free under CUSMA.
Cushman & Wakefield reports that this latest round of tariffs is not hitting every U.S. state equally. Using a location quotient analysis of tariff-weighted bilateral imports compared to overall import volumes, the firm finds that certain states face a significantly higher level of exposure than the North American average.
According to the report, states such as Maryland, Kentucky, Texas and Michigan have tariff-related exposures well above the regional norm. These states are heavily tied to categories now facing steeper duties, including automotive and vehicle parts in Michigan and Texas and aluminum products in Kentucky and Maryland. The concentration of these products in local import mixes amplifies sensitivity to trade policy changes.
Even so, elevated exposure does not necessarily translate into broad economic weakness. Trade linked to these flows accounts for 0.6% of Maryland’s gross domestic product and 1.5% of Texas’s GDP, indicating that while some sectors may be pressured, overall state economies retain meaningful diversification.
The picture looks different north of the border. Cushman & Wakefield notes that many Canadian provinces exhibit lower tariff-weighted exposure, yet trade with the United States represents a much larger share of their economies. That dynamic suggests Canadian markets could feel a more pronounced macroeconomic impact even when direct tariff exposure appears modest on a relative basis.
For commercial real estate, particularly industrial and logistics assets, the report flags several potential demand shifts. Third-party logistics providers may see increased throughput as retailers, wholesalers and manufacturers pivot toward just-in-case inventory strategies to buffer against trade disruptions. Efforts to maintain larger safety stocks can translate into additional warehousing and distribution requirements.
Bonded warehouse strategies are another potential pressure point. Companies may look to bonded facilities to defer tariff payments and better manage cash flow throughout the supply chain. However, the report notes that bonded warehouse availability has been constrained since last year, which could tighten options for occupiers seeking to implement these tactics.
The changing trade landscape may also reinforce onshoring and nearshoring trends. Cushman & Wakefield indicates that both U.S. onshoring and interest in Mexican production could accelerate as firms search for alternatives to Canadian-sourced inputs, particularly in automotive supply chains. Over time, this could reorient where manufacturing and logistics space is most in demand.
At the same time, tariff-driven increases in material costs add another layer of complexity for developers. Rising input prices can dilute some of the demand upside from reshoring and may push developers to favor higher-conviction, pre-leased or built-to-suit projects over speculative developments.
Cushman & Wakefield also points to the upcoming U.S. midterm elections as a potential inflection point for trade policy. The outcome could offer clues about the durability of the current tariff regime. Until there is greater clarity, the firm expects policy uncertainty to continue weighing on supply chains and business investment decisions across North America, with knock-on effects for industrial and logistics real estate strategies.
