PwC’s US Tariff Industry Analysis – Private Equity

In brief

What happened?

Since taking office on January 20, President Trump has introduced several policies and executive orders. On his first day in office, he issued the America First Trade Policy, which launched an investigation into unfair trade practices, expected to conclude on April 1. A key component of this investigation, "Unfair and Unbalanced Trade," targets countries with significant annual trade deficits in goods, potentially subjecting them to country-specific tariffs. This includes several European Union nations (e.g., Germany, Ireland, and Italy), Asian jurisdictions (e.g., Vietnam, Japan, and Taiwan), and other global trade partners. A review of unfair trade practices by other countries and a consultation with respect to the United States-Mexico-Canada Agreement (USMCA) also are key components of the investigation.

Additionally, on February 13, President Trump introduced the Fair and Reciprocal Plan, designed to evaluate and impose reciprocal tariffs on countries that enforce higher duties/tariffs on US goods, including through a value-added tax or other non-tariff barriers. The European Union, India, and Japan have been identified as potential targets due to their tariff policies on American products.

Both the America First Trade Policy and the Fair and Reciprocal Plan are expected to have their investigations completed by April 1 with potential new tariffs as soon as April 2. 

Why is it relevant?

Importers and purchasers across all sectors, including the entities owned by Private Equity (PE) firms, should assess the impacts of these new policies on a go-forward basis. To illustrate how impactful these tariffs might be, PwC prepared a US Tariff Industry Analysis using 12 months (January 2024 through December 2024) of US Census data along with Trump’s proposed tariffs surrounding China, Canada, Mexico.

The 2025 Trump tariffs impact both equity-focused PE firms as well as investment-focused PE firms. Equity-focused PE firms are impacted by the 2025 tariffs, resulting in increasing costs for portfolio companies reliant on imports, potentially reducing profitability and complicating exit strategies. For investment-focused PE firms, the tariffs may lead to market volatility and economic uncertainty, affecting the valuation and risk profile of their investments, especially in sectors sensitive to trade policies.

Action to consider

To mitigate the impact of the tariffs, equity-focused PE firms could support their portfolio companies in implementing strategies such as diversifying supply chains, reassessing sourcing locations, and exploring tariff engineering as well as dynamic pricing models to reduce costs and stay competitive. Additionally, they can leverage trade programs such as free trade agreements and duty drawback programs to manage or defer tariff expenses. Investment-focused PE firms should monitor market conditions and consider adjusting investment strategies accordingly, considering sectors less affected by tariffs. They also can evaluate opportunities in domestic markets.

For more details, read the full Tax Insight linked below.