Elliot Bonomini, Forensic Associate Director has put together his thoughts on President Trump's Tariffs and how he believes they will affect business valuations across the various markets.
Public markets
Public markets around the world have experienced significant volatility over the last few weeks following the announcement of President Trump’s tariffs, and subsequent retaliatory measures. On 14 April 2025, the FTSE 350 closed at 4,445, representing a 5.3% decline on its closing value on Trump’s ‘Liberation Day’ of 2 April, but also a reasonable recovery from the low point observed on 9 April, where the market closed below 4,200; representing a seven-day drop of 10.6%, which has not been observed in the market since the onset of the COVID-19 pandemic in March 2020. In the US, the S&P 500 declined by 12.1% across a similar period. The slight recovery brought about by the latest announcement of a 90-day suspension on new tariffs for numerous countries has brought about some stability in global markets. However, the ongoing uncertainty with China remains a major cloud.
Wider economic impact
Bank of England Governor Andrew Bailey has assured UK chancellor Rachel Reeves that the UK's financial markets are functioning effectively and that the banking system remains resilient, despite global market volatility triggered by the tariffs. Deputy Governor Clare Lombardelli has indicated that while the tariffs are expected to depress UK economic growth, their impact on inflation remains uncertain. The BoE plans to closely monitor these developments in the lead-up to its next interest rate decision on May 8 2025.
Private markets
For private companies, the effects are more nuanced. Deal activity may slow as uncertainty rises and cross-border dealmaking becomes more complex. UK businesses that export to, or operate in, the US may see deal values impacted due to reduced earnings visibility and lower confidence in exit timing as the impact of these announcements may make prospective acquirers more cautious. Some M&A disruption has already been observed in the market, with some high-profile IPOs, including the deferral of Shawbrook Bank’s planned £2 billion IPO, as well as delays to potential IPOs involving Klarna and Stubhub.
Small & Medium Enterprises (SMEs)
Conversely, there may be some diversion of the global supply of goods away from the USA towards other countries, including the UK and wider European markets. This might lead to lower costs and improved margins for UK importing businesses. However, in the SME space, it is estimated that more than 75% of UK SMEs are not engaged in import or export activity. Whilst these businesses will of course be impacted by the so-called ‘rippling effect’ that the proposed tariffs will have on the wider macroeconomic environment, the direct impact that the tariffs have on these businesses may be limited. Moreover, these businesses, like many others, may face threats from domestic challenges, such as the (now, apparently overshadowed) increases to the living wage and employer national insurance contributions which took effect from 6 April 2025.
Summary
In summary, whilst we have observed levels of volatility within the public markets not seen since the start of the COVID-19 pandemic, the announcement of the 90-day suspension has brought about some stability. We could see an impact on private company valuations to the extent that the level of uncertainty around forecasts becomes factored into potential deal values, however, it remains to be seen how the proposed tariffs and retaliatory measures will impact the private capital markets in the long-term.
