US reciprocal and current tariffs: Potential impact for the Private Equity industry

What happened?

The Trump administration’s implementation of “reciprocal tariffs” continues to be dynamic, prompting a challenging trade landscape for many multinational companies. The President signed an executive order on April 2, made announcements, and released memoranda on this matter. In summary, the new tariffs in place as of the date of this Insight include the following (this list does not reflect all previously existing tariffs):

• A 10% base tariff on most imported goods (with the exception of certain exempt goods included in Annex II of the April 2 executive order such as smartphones, computers, other electronic devices, and semiconductors) from all countries (except Canada, Mexico, and China). 
• Adjusted country-specific tariffs of up to 50% (with certain exceptions as noted above), however, a 90-day pause (ending July 9) is in place for the adjusted country-specific tariffs to allow time for individual country trade negotiations. The exempted goods are expected to be addressed in separate forthcoming executive orders on tariffs, and the US Department of Commerce has initiated a Section 232 investigation to assess their impact on national security. The comment period closed on May 7 and the expectation is that implementation of specific tariffs on semiconductors and semiconductor manufacturing equipment will be accelerated well before the 270-day requirement.
• All goods from Canada and Mexico that do not qualify as originating under the United States-Mexico-Canada Agreement (USMCA) remain subject to earlier 25% tariffs. Duty free status under the agreement remains for those goods that qualify. Certain imports from Canada are currently subject to a lower additional ad valorem duty of 10%. The April 2 executive order specifies that upon the termination or suspension of the earlier orders specific to Canada and Mexico, the 25% tariff will revert to a 12% reciprocal tariff rate.
• Tariffs on Chinese imports of 125% have been implemented (up to 145% with existing tariffs included). The elimination of the de minimis exemption for low-value imports from China and Hong Kong went into effect May 2.

A wider industry perspective can be found in PwC’s US Tariff Industry Analysis Insight published on April 22 and additional information can be found in the US Customs and Border Protection CBP tariff requirements released May 2. The administration recently noted that more than 100 countries wish to negotiate trade imbalances with a drive towards an economic level playing field and fair-trading system. As of the date of this Insight, no change in previously noted rates has been announced. 

Tariffs introduce new complexities for private equity (PE) firms amid rising recession risks driven by softening consumer demand and growing macroeconomic uncertainty. Trade-driven inflation, combined with ongoing monetary tightening, may elevate the cost of capital, affecting leveraged transactions and refinancing conditions. Capital could shift toward domestic or less trade-exposed sectors like enterprise software and business services. Firms also should anticipate heightened demand for restructuring and turnaround opportunities as some portfolio companies struggle with unexpected tariff impacts.

Reciprocal and current tariffs are affecting private equity firms across both the pre-deal and post-deal periods. Prior to the deal, firms face heightened market volatility, reduced cross-border deal flow, and increased due diligence requirements related to trade exposure and supply chain risks in target companies. Following the deal, tariffs are driving increased portfolio company costs, supply chain disruptions, and potential margin pressure—particularly for investments in trade-exposed sectors such as manufacturing, healthcare, and industrials.

This Tax Insight serves as an update to our March 17 Industry Analysis, which previously included forecasted reciprocal tariff rates at that time. Note: PwC’s updated Industry Analysis utilizes the tariffs that have been implemented by the United States as of April 15 (based on the guidance and specific factors explained in the next section) as well as potential tariffs on so-called Annex II products.

To mitigate the impact of the reciprocal and current tariffs, PE firms can support their portfolio companies by considering diversifying supply chains, reassessing sourcing locations, leveraging tariff engineering, and implementing dynamic pricing models to manage rising costs and maintain competitiveness. Firms also should explore trade programs—such as free trade agreements (FTAs), duty drawback, and foreign-trade zones—to mitigate or defer tariff-related expenses. Additionally, firms may need to assess how evolving trade policies affect cross-border deal flow and consider shifting investments strategies toward sectors and geographies less exposed to tariff risk, including opportunities in domestic markets. Coordination efforts across procurement, supply chain, tax, and leadership teams are critical to develop cohesive short, medium, and long-term responses. Leveraging advanced data tools—particularly US customs data—can help quantify the true financial impact and uncover “no-regret” actions that support strategic decision-making and risk mitigation.

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