In 2025, the U.S. implemented significant tariff increases, with the average effective tariff rate rising to 18.0%, the highest since 1934. This surge in trade barriers has introduced new complexities and impacts on M&A, affecting deal valuations, due diligence processes, and cross-border transaction strategies.
Following the U.S. tariff spike to 18%, global trade tensions escalated rapidly. China raised tariffs on U.S. goods to 125%, targeting sectors like EVs and solar, while Canada imposed 25% duties on non-USMCA auto imports.
The EU authorized a 25% retaliatory tariff before suspending it amid ongoing talks. This intensified the impact of the 2025 tariffs on M&A: dealmakers now face heightened valuation risks, more complex due diligence, and increased uncertainty in cross-border strategies.
Tariffs and Industry Dynamics
Implementing the 2025 U.S. tariffs, particularly the “Liberation Day” tariffs introduced by President Trump, has significantly impacted various industries, including manufacturing and industrial sectors.
These tariffs, aimed at promoting domestic production and addressing trade imbalances, have introduced new challenges and opportunities in M&A.
Impact on Supply Chains and Production Costs
The tariffs have increased the costs of imported raw materials and components, compelling manufacturers to reassess their supply chains.
Companies that are heavily reliant on imports are experiencing heightened production costs, prompting a shift towards domestic sourcing and manufacturing to mitigate tariff- related expenses.
M&A Activity Shifts in Response to Tariffs
The altered economic landscape has influenced M&A strategies in the manufacturing and industrial sectors. Companies actively seek acquisitions that offer greater control over supply chains and production processes.
This trend is evident in the increased interest in domestic firms with robust local manufacturing capabilities, as businesses aim to reduce their dependency on foreign suppliers.
Case Studies of Affected Deals
- Kimberly-Clark’s International Tissue Unit Sale: In response to increased costs from U.S. trade tariffs, Kimberly-Clark is divesting its $4 billion international tissue business. The unit attracts bids from companies like Royal Golden Eagle and Suzano SA, highlighting the impact of 2025 tariffs on M&A.
- Nissan’s Strategic Restructuring: Facing a projected £4 billion loss, Nissan attributes part of its financial challenges to uncertainties linked to U.S. tariffs. The company is undergoing significant restructuring, including job cuts and a shift towards electric vehicle production.
Technology and Healthcare Sectors
The impact of 2025 tariffs on M&A has significantly impacted various industries, with the technology and healthcare sectors experiencing unique challenges and shifts. These sectors, integral to innovation and public well-being, are navigating the complexities introduced by the new tariff landscape.
Technology Sector: Navigating Tariff-Induced Challenges
The tariffs have directly affected the technology industry, particularly hardware and semiconductor companies. Imposing tariffs on imported components has increased production costs and supply chain disruptions.
- Supply Chain Disruptions: Tariffs have disrupted established supply chains, compelling companies to seek alternative suppliers or reshape manufacturing processes.
- Increased Production Costs: The additional costs associated with tariffs have squeezed profit margins, affecting the financial viability of certain products and services.
- Strategic Acquisitions: Firms are pursuing acquisitions that offer technological synergies and access to untapped markets, aiming to diversify revenue streams and reduce dependency on tariff-affected products.
- Investment in Domestic Capabilities: There is a noticeable trend toward investing in domestic manufacturing and R&D facilities to circumvent tariff-related issues and strengthen supply chain resilience.
Healthcare Sector: Addressing Tariff-Induced Uncertainties
The 2025 tariffs will challenge the healthcare industry, encompassing pharmaceuticals and medical devices. The sector’s reliance on global supply chains makes it particularly vulnerable to trade disruptions.
- Pharmaceuticals: Tariffs on imported raw materials and active pharmaceutical ingredients (APIs) have increased production costs. Companies are exploring options like localizing supply chains and seeking tariff exemptions to maintain profitability.
- Medical Devices: Manufacturers of medical devices are grappling with higher costs for imported components, prompting a reevaluation of sourcing strategies and potential shifts toward domestic production.
- Consolidation for Efficiency: M&A activities are driven by the need to consolidate operations, reduce costs, and improve bargaining power with suppliers and regulators.
- Expansion into New Markets: Firms are acquiring companies in different geographical regions to diversify market presence and mitigate risks associated with tariff-induced market volatility.
Consumer Goods and Retail Sectors
The impact of 2025 tariffs on M&A have significantly impacted the consumer goods and retail sectors, introducing new challenges. These industries are deeply intertwined with global supply chains and are sensitive to consumer sentiment.
Tariff-Induced Cost Pressures
The imposition of tariffs has increased costs for imported goods and raw materials. For instance, Kimberly-Clark anticipates $300 million in additional expenses in 2025 due to changes in the international tariff environment.
Such cost pressures compel companies to reassess their pricing strategies, supply chain configurations, and operational efficiencies.
- Price Adjustments: Companies may pass increased costs onto consumers, potentially affecting demand.
- Supply Chain Reevaluation: Firms are exploring alternative sourcing options to mitigate tariff impacts.
- Operational Efficiency: Businesses invest in automation and process improvements to offset rising expenses.
Impact on Consumer Behavior
Tariffs affect company operations and influence consumer behavior. The National Retail Federation reported a 0.22% month-over-month decline in U.S. retail sales in February 2025, attributing the dip to concerns over tariffs and economic uncertainty.
M&A Strategies Amid Tariff Challenges
The evolving tariff landscape has prompted companies in the consumer goods and retail sectors to adapt their M&A strategies:
- Strategic Acquisitions: Firms target acquisitions that offer supply chain resilience or access to untapped markets less affected by tariffs.
- Divestitures: Companies are divesting non-core assets to streamline operations and focus on areas with higher growth potential.
- Joint Ventures: Collaborations with local partners in foreign markets can help navigate tariff barriers and maintain market presence.
For example, Reckitt Benckiser is considering delaying the sale of its non-core home- care brands due to market volatility triggered by U.S. tariff policies. Such decisions reflect companies’ cautious approach to the uncertain trade environment.
Outlook and Considerations
While the full impact of the 2025 U.S. tariffs continues to unfold, companies in the consumer goods and retail sectors must remain agile:
- Continuous Monitoring: Stay informed about policy changes and adjust strategies accordingly.
- Risk Management: Implement robust risk assessment frameworks to evaluate potential impacts on operations and finances.
- Consumer Engagement: Maintain transparent communication with consumers regarding pricing and product availability to sustain trust and loyalty.Reuters
Strategic Responses and Future Outlook
The 2025 U.S. tariffs have introduced significant volatility into the M&A landscape, compelling dealmakers to adopt innovative strategies to navigate the evolving trade environment.
As companies grapple with increased costs and supply chain disruptions, the focus has shifted towards risk mitigation, strategic realignment, and long-term resilience.
Adaptive Deal Structuring in a Tariff-Heavy Environment
To counteract the uncertainties introduced by the tariffs, M&A professionals are reengineering deal structures to distribute risk more effectively. Key adaptations include:
- Deferred Payments: In the $4.46 billion acquisition of Intel’s Altera unit by Silver Lake Partners, a portion of the payment was deferred to mitigate immediate financial exposure.
- Contingent Value Rights (CVRs): These instruments are being utilized to align the interests of buyers and sellers, especially in transactions where future performance is uncertain due to tariff impacts.
- Material Adverse Effect (MAE) Clauses: Enhanced MAE clauses are incorporated to address potential negative outcomes stemming from tariff escalations.
Sector-Specific Strategic Shifts
Different industries are experiencing varied impacts from the tariffs, prompting tailored strategic responses:
- Manufacturing: Companies are exploring domestic acquisitions to localize supply chains and reduce tariff exposure.
- Technology: Firms focus on acquiring entities with robust intellectual property portfolios to diversify risk.
- Healthcare: There is a trend towards consolidating operations to achieve economies of scale and mitigate increased costs.
Future Outlook: Navigating Uncertainty with Strategic Agility
While the full ramifications of the 2025 U.S. tariffs are still unfolding, companies are proactively adapting to the new landscape. Key considerations for future M&A activities include:
- Enhanced Due Diligence: Thorough analysis of supply chain vulnerabilities and tariff exposures is becoming standard practice.
- Flexible Deal Terms: Incorporating clauses that allow adjustments based on tariff developments is increasingly standard.
- Strategic Patience: Some firms delay transactions until there is greater clarity on trade policies.
Conclusion: Impact of 2025 Tariffs on M&A Business Exit Strategy
The tariffs have fundamentally altered M&A, introducing new challenges and considerations. Companies must now navigate increased costs, supply chain disruptions, and heightened regulatory scrutiny, all of which can impact deal viability and success.
At Now Exit, we specialize in guiding businesses through the complexities of M&A transactions in today’s dynamic economic climate. Our team of experts is equipped to help you assess opportunities, mitigate risks, and execute strategies that align with your business objectives.
Ready to explore how we can support your M&A goals amid the current tariff landscape? Contact Now Exit today to schedule a consultation and take the first step toward informed, strategic decision-making.