After the 2024 election, dealmakers anticipated a surge in M&A activity in the new year.[1] However, dealmaking in the United States during the first two months of this year marked the slowest start in over two decades.[2] According to Dealogic, 1,172 deals totaling $226.8 billion were completed by early March, reflecting a decline of roughly one-third in both volume and value compared to last year. [3] While President Trump’s tariffs were anticipated, the uncertainty of the rapid economic changes has chilled the market.[4] Potential sellers are likely to wait until the markets stabilize, ensuring their projected valuations remain intact and unaffected by current geopolitical trends.[5] Paul Weiss partner Scott Barshay noted “[o]ur clients are waiting and seeing to see how things work out.”[6]
President Trump had proclaimed April 2nd as a “Liberation Day,” a moment to introduce reciprocal tariffs aimed at aligning U.S. rates with those of its trading partners.[7] Initially, these tariffs were expected to target sectors like automobiles, pharmaceuticals, and semiconductors.[8] At one point, an administration official indicated these sector-specific tariffs were not likely to be announced on April 2nd. Instead, rumors suggested the administration shifted focus, narrowing its approach strictly to reciprocal levies on key trading nations while delaying sector-specific tariffs.[9] The Trump Administration’s unpredictable trade policy and speculation surrounding Liberation Day only added to the uncertainty, leaving markets hesitant and dealmakers cautious.
The speculation surrounding President Trump’s trade policy was clarified when the administration finally announced the tariff strategy. A “discounted reciprocal tariff” is expected to take effect on April 9th, targeting nations with existing tariffs against the United States.[10] Starting April 5th, 2025, a 10% baseline tariff will be imposed on all imports.[11] For instance, Japan, which imposes a 46% tariff on U.S. goods, will now face a 24% tariff in return.[12] The administration has also introduced a 25% tariff on all foreign-made automobiles.[13] These measures, while aiming to align U.S. trade policies with global standards, have sparked significant backlash, with China — now subject to 54% tariff — vowing retaliation. M&A activity is precariously treading water, as geopolitical disputes and fluctuating tariffs rattle investor confidence.[15]
In response, KPMG’s Deal Advisory team has urged buyers and sellers to evaluate how the new high-tariff environment might affect their businesses.[16] They emphasized the importance of identifying critical vulnerabilities, including costs, supply chain challenges, and alternative pricing approaches.[17] Additionally, target companies must consider strategic solutions so they may maintain their value. For instance, target companies may establish operations in jurisdictions outside the U.S., or companies serving the U.S. market could leverage domestic acquisitions to increase U.S. based production.[18]
In conclusion, the evolving tariff landscape has introduced a new layer of complexity to the M&A outlook for 2025. While the administration’s policies aim to recalibrate trade dynamics, the resulting uncertainty has left dealmakers navigating uncharted waters. As geopolitical tensions and economic fluctuations persist, the ability to adapt and strategize will be paramount for businesses seeking to thrive in this high-tariff environment. The coming months will reveal whether these measures eventually stabilize the market or continue to dampen investor confidence, shaping the trajectory of M&A activity for the year ahead.
[1] See Salvatore Luciano, Antitrust Tug-of War: Biden’s FTC Blocks Tapestry Capri Merger, Trump’s Return Looms, Fordham J. of Corp. & Fin. L. (Nov. 27, 2024), https://news.law.fordham.edu/jcfl/2024/11/27/antitrust-tug-of-war-bidens-ftc-blocks-tapestry-capri-merger-trumps-return-looms/.
[2] Abigail Summerville et al., Dealmakers in wait and see mode, expect M&A pace to pick up later in 2025, Reuters (Mar. 6, 2025, 5:10 PM), https://www.reuters.com/markets/deals/dealmakers-wait-see-mode-expect-ma-pace-pick-up-later-2025-2025-03-06/.
[3] Id.
[4] Svea Herbst-Bayliss et al., Trump policies cast chill on Wall Street dealmaking, Reuters (Mar. 5, 2025, 11:24 AM), https://www.reuters.com/world/us/trump-policies-cast-chill-wall-street-dealmaking-2025-03-05/.
[5] Id.
[6] Summerville et al., supra note 2.
[7] Gavin Bade et al., White House Narrows April 2 Tariffs, Wall St. J. (Mar. 23, 2025, 5:26 PM), https://www.wsj.com/politics/policy/trump-tariff-reciprocal-deadline-industrial-delay-97508838?mod=latest_headlines.
[8] Id.
[9] Id.
[10] Fact Sheet: President Donald J. Trump Declares National Emergency to Increase Our Competitive Edge, Protect Sovereignty, and Strengthen our National and Economic Security, The White House (Apr. 2, 2025), https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-declares-national-emergency-to-increase-our-competitive-edge-protect-our-sovereignty-and-strengthen-our-national-and-economic-security/.
[11] Tariff News, April 2, 2025: Trump Unveils Sweeping Levies in Stark Shift in Trade Policy, Wall St. J. (last updated Apr. 3, 2025 at 3:16 AM), https://www.wsj.com/livecoverage/trump-tariffs-trade-war-stock-market-04-02-2025.
[12] Id.
[13] Id.
[14] David Lawder et al., Trump stoked trade war as world reels from tariff shock, Reuters (Apr. 3, 2025), https://www.reuters.com/world/trump-stokes-trade-war-world-reels-tariff-shock-2025-04-03/.
[15] Summerville et al., supra note 2.
[16] Louis Lehot & Christopher Swift, Weathering the Storm: Key M&A Considerations for Foreign Investors Entering the U.S. Market, Foley & Lardner LLP (Mar. 24, 2025), https://www.foley.com/insights/publications/2025/03/key-m-a-considerations-foreign-investors-entering-us-market/.
[17] Id.
[18] Id.
