Tariff tumult and chatter from U.S. President Donald Trump about Canada becoming the 51st state have done more than just lead some Canadians to cancel vacations to visit their southern neighbor — and even sell American properties out of concern.
The cross-border tension is drawing attention to a push for Canadian pension funds to adjust their strategy and invest more domestically. Such a move would mark a symbolic shift for the nation that's the largest foreign investor in U.S. commercial property.
The tensions reached a new level this week as Canadian Prime Minister Mark Carney met in the White House with Trump, with Carney saying Canada wasn't for sale and Trump responding that no one should rule such a deal. Disputes since Trump began his second term in January over levies the U.S. is putting on Canadian goods — and the annexation talk — follow demands by almost 100 prominent Canadian business leaders that domestic pension funds invest more of their assets in Canada. The new circumstances revive that push begun more than 18 months ago, according to its organizer.
“Recent trade disputes have only exacerbated this issue, highlighting the urgent need for decisive action,” said Daniel Brosseau, a partner at management consulting firm McKinsey & Co. and a leader in the push for more domestic investment.
The group has noted that Canada’s pension fund assets have increased by $1.2 trillion over the past decade but that none of the growth was reinvested domestically in that time. That's even while the overall domestic investments held by Canadian pension plans declined 25% in real terms.
Brosseau said the pattern of pension plans investing primarily in the U.S. and other countries has a major downside. “Canadian financial sovereignty is at risk due to our pension funds' lack of substantial domestic investment, potentially depriving our country of much-needed capital,” he told CoStar News in an email.
The effort to push for more investment in Canada has attracted support from a range of business leaders, including Couche-Tard founder Alain Bouchard, former Scotiabank CEO Brian Porter, former Blackberry Chief Executive Jim Balsillie and hotelier Howard Pechet.
Not everyone agrees that pension funds should forgo U.S. investments for Canadian assets. Some say money managers need to put aside emotional decisions and look to the bottom line — and only change strategy after immediate news events can be digested.
“The pension funds support the Canadian economy in a strong way, and with regards to trade wars I think it is really premature to make any judgments," Brett Miller, CEO of Montreal-based real estate developer Canderel, said in an interview. "Real estate is a long-term hold with long-term returns. I don’t necessarily agree with the premise that Canadian pension funds are not loyal to Canada."
Canada's US property investment
A drop-off in Canadian investment in U.S. commercial property could affect an American sales market that is showing signs of a rebound. Canada investors poured more money into United States offices, warehouses and other commercial real estate assets and debt than did any other country in the second half of 2024, according to a report from CBRE. Canada also topped CBRE's list in 2023.
While Canadian investors were the top source of inbound capital for commercial property at 4 billion U.S. dollars in the second half, the total represented a drop of 28% from the same time in 2023, according to CBRE, amid concerns about high interest rates.
The initiative to get pension funds to increase their investments in Canada has led to much discussion but so far no commitments, with Canada’s pension funds staying out of the debate. Representatives of the Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec, QuadReal, the Ontario Municipal Employees Retirement System and other major Canadian pension funds did not respond to email queries from CoStar News asking for comment on their plans to invest in the United States.
New real estate investments into the United States appear to be slowing.
“Anecdotally, there's a general sense of pencils down for the moment,” said Gunnar Branson, CEO of the Association of Foreign Investors in Real Estate, or AFIRE, a group that represents approximately 180 large international investment organizations from 25 countries. The group collectively oversees more than US$3 trillion in assets under management in the United States.
The pause comes as Canadian interest rates have become more manageable after seven cuts in the past year, and the economic outlook generally is seen as brighter than in 2024.
Nonetheless, 80% of the large-scale non-U.S. real estate investors queried in a recent survey identified global political tension and economic realignments as the greatest threats to cross-border investment in 2025. Almost two-thirds, or 63% of investors, maintain a negative outlook for foreign investments into the United States this year, up from 42% in the fall of 2024, according to a recent AFIRE survey taken just prior to Trump's tariff announcements.
Despite their apprehensions, investors recognize the United States as a safe place to put their money, Branson said. “There is an understanding generally in the institutional investment community that the U.S. property markets overall are in very good shape from a real estate perspective and are interesting to them,” he said.
The tariffs imposed by the United States and the retaliatory trade taxes put on United States goods coming into Canada already have tamped down desire by Canadians to travel to the States. In March, the number of Canadians returning to their country from the United States by car was 1.5 million, a drop of nearly 32% from the same month in 2024, according to Statistics Canada. "March 2025 marked the third consecutive month of year-over-year decline," StatsCan said in a report.
The number of return trips Canadians made from the United States by air travel in March was 13.5% lower than the same month in 2024, StatsCan said.