A pause, not a peace. On 12 May, the U.S. and China agreed to a surprise 90-day trade truce - scaling back tariffs, reopening diplomatic channels, and attempting to halt the destabilising spiral that began with President Trump’s 2nd April tariff proclamation. For now, this offers welcome relief to global markets and manufacturers (the financial markets responded positively, with the S&P 500 opening 2.5% higher and the tech-heavy Nasdaq composite up 4.2%). However, for corporate real estate leaders, the picture remains highly conditional.

Tariffs on U.S. imports from China will drop from 145% to 30%. In return, China is reducing duties on U.S. goods from 125% to 10% - a symbolic and practical de-escalation. Yet, the underlying tensions are far from resolved. Both sides have signalled that a breakdown in talks would mean a sharp return to full-scale tariffs by August.

This short briefing captures this latest development’s potential real estate and supply chain implications. It outlines how businesses are positioning in a world where a truce is no guarantee of stability. There are six points worthy of note:

1. Temporary Relief, But Permanent Caution

The tariff rollback provides occupiers with operational breathing space. Supply contracts are being reinstated, suspended shipments are being cleared, and investment committees are back in session. But occupiers remain wary: no one is planning on the assumption that tariffs won’t return.

Real Estate Implication:

Expect a modest thaw in transaction volumes, especially in logistics hubs tied to U.S.–China trade. However, long-term commitments will remain cautious, particularly in new manufacturing plants. Flexible lease models and optioned expansions remain the preferred path.

2. Southeast Asia’s Second Wind

The truce may dampen the urgency of relocating production from China, but it will not affect the trajectory. “China-plus-one” strategies remain intact. Vietnam, Thailand, and Indonesia continue to benefit from production diversification - what changes is the tempo, not the trend.

Real Estate Implication:

APAC industrial hubs should brace for a breather, not a bust. Leasing volumes may flatten in Q2 but rebound if talks falter. Developers in these regions are using the pause to upgrade infrastructure and fast-track permitting.

3. Tariff Triggers Become Embedded Norms

Even with tariff relief, corporate legal teams are doubling down on trade-sensitive lease structures. “Tariff escape clauses,” “trade stress indexes,” and “political risk premiums” are increasingly shaping rent negotiations and site selection models.

Real Estate Implication:

Expect to see a standardisation of “trade-contingent leasing” - particularly in cross-border warehousing and manufacturing. Asset owners must work with occupiers to create transparent, fair and flexible clauses that recognise today’s fluid policy environment.

4. U.S. Reshoring: Still More Talk Than Steel

The truce has not reversed the logic of strategic reshoring, especially in semiconductors, pharmaceuticals and EV supply chains. But neither has it accelerated them. The same constraints apply: permitting bottlenecks, labour gaps, and prohibitive construction costs.

Real Estate Implication:

Brownfield retrofits will remain the dominant reshoring mechanism for now. Expect demand in secondary U.S. cities with existing industrial footprints and infrastructure-ready sites. High-spec build-to-suit activity will be limited to firms with strong state subsidies or critical-sector status.

5. Mexico: From Darling to Disrupted

Already shaken by April’s tariff threats, the U.S.–China détente has not revived Mexico’s manufacturing momentum. On the contrary, the shifting focus back to Asia and Washington’s continued unpredictability on southern border policy is dimming its nearshoring appeal.

Real Estate Implication:

Industrial demand along the U.S.–Mexico border has flattened, and developers are pulling back on speculative builds. While some occupiers remain committed, most are delaying second-phase investments until political rhetoric softens or the U.S. election cycle clarifies.

6. Inventory Strategies Reset, Again

The truce has triggered another rethink in inventory strategy. Some firms are releasing safety stock held in anticipation of prolonged tariff escalation. Others are using the window to rebuild critical inventory ahead of a possible re-escalation in Q3.

Real Estate Implication:

This volatility continues to distort warehouse demand, particularly in multi-client facilities.

Short-term storage contracts are rising, and vacancy rates remain compressed in key intermodal corridors. Flexibility, again, trumps efficiency.

Where Next for Tariffs? Scenario Matrix (As of 12.5.25)

What happens after the 90-day U.S.–China truce? CRE leaders should prepare for all outcomes. Here are three core scenarios that will shape industrial real estate strategy.

This is a reprieve, not a resolution. Tariffs may fade, morph, or return. Resilient portfolios aren’t built on predictions; they’re built on preparedness.

The Final Word: CRE Strategy in the Shadow of Uncertainty

The May truce changes the tone but not the terrain. Occupiers and CRE leaders now operate in a world where trade policy is a moving target, not a settled framework. The 90-day window offers respite but not reassurance.

Analysis of responses to Knight Frank’s Global CRE Sentiment Index showed a negative impact of the 2nd April reciprocal tariff announcement on occupier sentiment. It is unlikely that developments five weeks on are sufficient to bring a complete rebound to sentiment, given that outcome uncertainty remains high.

As a consequence, for CRE leaders and occupiers, the imperatives are unchanged but more
urgent:

• Stay agile: Lock in short- and mid-term options across multiple jurisdictions.
• Build resilience: Invest in logistics redundancy, dual-sourcing, and digital inventory tracking.
• Demand flexibility: Ensure leases and contracts can pivot if policy does.
• Monitor closely: Treat every tariff move as a real estate signal, not just a financial one.
• Plan for reversion: Assume full tariffs may return, and prepare portfolios accordingly.

Trade policy may be fluid, but strategic preparation doesn’t have to be. The next disruption isn’t a quest of if but when. Readiness will separate those who adapt from those forced to absorb the cost.