Private equity deal flow appeared to be making a tentative recovery in 2024. The outlook under the Trump administration was broadly positive due to its perceived support for deregulation, but Trump's tariff stance could impede recovery.

President Trump's implementation of sweeping tariffs, including those on Canada, Mexico, China, and global steel and aluminium, has created uncertainty in the market. The looming threat of tariffs on EU goods has the potential to escalate into a full blown tariff war affecting various sectors.

In addition to industries reliant on steel and aluminium, Pitchbook anticipates the consumer goods, energy, manufacturing, and agriculture sectors will be among the hardest hit by the tariffs. This leaves relatively few sectors untouched. As a result, diversified investors might opt to de-risk by shifting away from these vulnerable sectors, while investors with more focused mandates may struggle to achieve their target exit multiples (already a challenge over the last few years), further extending PE holding periods (see last month’s article ‘PE Investment Outlook for 2025’) and trapping capital.

Moreover, ‘tariff wars’ and other protectionist policies have increased global geopolitical tensions, which will discourage cross-border dealmaking, and we expect due diligence will take longer in many cases, due to the need for greater supply chain analysis and verification.

While we will almost certainly see some of these tariffs come into effect in the coming months, many see the use of tariffs as a strategic manoeuvre intended to bring world leaders to the negotiating table. If this is the case, PE may still recover strongly in 2025.