A Ripple Effect Across the Market

Economic uncertainty affects all types of investing, including deals backed by family offices and private equity firms. Venture capital–funded mergers and acquisitions are also slowing down. When markets face short-term risks, investors hesitate. Decisions are delayed until more information is available.

Right now, the market consensus is strong: tariffs are hurting the economy and disrupting a global supply chain that’s taken decades to build.

How Tariffs Affect Investment Activity

Tariffs act like a tax on U.S. businesses that import goods. These added costs pass through the supply chain, raising prices at each step until they reach consumers. This slows spending and reduces business efficiency.

Over time, these rising costs shift demand toward other markets, which can hurt U.S. exporters. Retaliatory tariffs from trade partners make the situation worse, reducing demand for American goods—from Kentucky bourbon to California wine.

As demand falls, companies reduce spending and hiring. Many delay or cancel large projects, particularly those involving new technology or long-term capital investment. This cautious approach drags down investment activity across the board.

Impact on Venture Capital and Growth Investment

Lower revenue forecasts and reduced cash flow projections lead investors to apply lower valuations. Startups and growth-stage companies respond by delaying fundraising or postponing plans to go public or get acquired.

When venture capital and private equity firms can’t sell or exit investments, they can’t return profits to their investors—like pension funds or wealthy individuals. Without that return, raising new capital becomes harder, and the entire cycle of investment activity slows down or stops temporarily.

Investors Look for Stability

Tariffs add a new layer of risk to an already uncertain market. As a result, many investors are shifting focus to domestic companies and minimizing their exposure to global supply chain issues. This trend mirrors the caution seen during the later stages of the COVID-19 pandemic, when M&A activity also slowed due to supply chain concerns and pricing uncertainty.

Depressed company valuations have made sellers more cautious, making deal-making even more difficult.

Outlook: Clarity Needed to Boost Investment Activity

Until the government provides clearer tariff policies, investors will likely continue to focus on U.S.-based opportunities. But even the pool of strong domestic options is shrinking.

The message from the market is clear: tariffs are damaging both the U.S. and global economy, and the uncertainty they bring is dragging down investment activity across all sectors.