Trump Administration Tariffs: Key Considerations for Private Equity Investors

President Trump’s return to the White House has been accompanied by an increasingly aggressive trade policy that seeks to restore global trading imbalances by imposing reciprocal tariffs on imported goods. While the administration’s bold policy announcements have been a marked contrast when compared to its less confrontational predecessors, the administration’s objective seems to be challenging economic (as well as non-tariff) barriers that reduce global market access for US manufacturers.

On April 2, 2025, the Trump administration issued an executive order that imposed a 10% ad valorem tax – a “reciprocal tariff” – on all imports (except for a 25% tariff on imported aluminum and steel), a move designed to address persistent trade deficits. The executive order further identified 57 countries that would soon become subject to additional tariffs above the 10% baseline, with tariffs on imports from some countries as high as 50%. 

As of the writing of this article, the administration was abiding by a “90-day pause” announced on April 9, which was intended to limit the April 2 tariffs to the baseline 10% tax, with the exception of aluminum and steel imports, and a 145% tariff on all Chinese imports. Looking to Canada and Mexico, the United States is expected to continue to respect the existing US-Mexico-Canada free trade agreement (USMCA), although products imported from the two countries that are not USMCA-compliant will be subject to a 25% tariff imposed earlier this year.

This dramatic change in US trade policy has increased volatility in public markets and spread fear across the globe. While the impact of Trump’s trade policy on the private equity industry will be difficult to decipher, a few initial observations come to mind.

Importantly, because tariffs generally target imported goods, private equity firms that invest in intellectual property and services businesses – most notably software – which comprise a significant portion of the private equity ecosystem because of their highly scalable business models, are likely to avoid much of the direct impact of the Trump administration tariffs. While software investors may ultimately luck out, other subsectors of the technology industry, particularly hardware and components manufacturers, are likely going to be significantly impacted given their reliance on imports. Sponsors invested in subsectors of the technology industry thought to be more resilient to the impact of tariffs would also be wise to consider the potential indirect impact of the Trump administration tariffs – for example, the increased cost of semiconductors needed to power data center expansion for AI companies. Note, however, that on April 11, the administration granted an exemption for smartphones, semiconductors, computers, and other tech devices. 

Other industries dependent upon large-scale manufacturing, such as consumer products companies, are also likely to be significantly impacted, with many early-stage consumer products investors adopting a temporary “wait and see” approach to new investment opportunities. 

Despite the inherent uncertainty of the current political climate, there are several steps that private equity professionals can take in connection with new investments and to protect their existing portfolios. 

When evaluating new investments, sponsors and their portfolio companies will want to consider how tariffs may impact valuations, taking into account changes to production costs, the potential to shift costs to consumers and end-users, as well as the impact of tariffs on their competitors.

In addition, private equity sponsors should pay special attention to understanding the supply chains of existing portfolio and target companies and see if there are opportunities to diversify, exploit tariff exemptions, or benefit from free trade agreements. For example, a sole-source supplier located in a jurisdiction that is likely to face punitive tariffs could result in a significant increase in manufacturing costs. Conversely, tariffs may drive opportunities to acquire companies with more geographically diversified operations or those that stand to benefit from tariff-related shifts in the market.

We also expect the tariffs to influence purchase agreements in the M&A context, but not dramatically. For example, practitioners may want to consider whether to specifically exclude the impact of tariffs from certain definitions (eg, “Material Adverse Effect”) or to clarify whether the potential impact is part of the “Ordinary Course of Business”. Practitioners will also want to work with representation and warranty insurance underwriters to clarify the insurability of tariff-related representations. 

Private equity funds and their portfolio companies may also seek to influence the legislative process, which may improve their visibility into the administration’s legislative priorities, as well as the priorities of congressional Republicans, and allow them to influence the impact of tariffs on their businesses. As the impact of the Trump administration’s tariffs continue to ripple through global markets, we expect to see sponsors increasingly attempt to influence domestic policy through lobbying efforts, trade groups, or otherwise.

The Mintz Private Equity and M&A teams are actively monitoring the evolving tariff landscape and are available to assist with protecting your portfolio companies and capitalizing on new opportunities that arise. We are also working closely with our colleagues at ML Strategies, our affiliated government relations and lobbying arm, to help our private equity clients develop creative strategies for navigating federal trade policy. 

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