Navigating Turbulence: How Tariffs Are Reshaping the 2025 U.S. M&A Landscape

According to S&P Global, in the first quarter of 2025, U.S. M&A activity showed a notable rebound in total deal value despite ongoing market volatility. The aggregate value of announced U.S. M&A deals reached $383.12 billion, marking a 29.7% increase from the previous quarter and a 2.0% rise year over year. This growth was driven by several large transactions, including Sycamore Partners’ $44.34 billion acquisition of Walgreens Boots Alliance and Google’s $32 billion purchase of Wiz Inc. However, the number of M&A announcements declined by 11.0% from the prior quarter to 3,660. The technology, media, and telecommunications (TMT) sector led in deal value and volume, followed by industrials, which also saw a sharp rise in total transaction value despite fewer deals.

Tariffs are only one factor shaping the current M&A landscape, compounded by broader macroeconomic pressures, including elevated interest rates, tightening credit markets, and geopolitical uncertainties.

The immediate impact of new tariffs on M&A activity is twofold:

• Headwinds – Input cost volatility, supply chain disruptions, and retaliatory tariffs introduce uncertainty into business valuations, complicate due diligence processes, and sometimes prolong deal timelines. In particular, industries heavily reliant on imports, such as automotive, consumer electronics, and retail, are seeing buyers exercise greater caution, often structuring deals with increasing contingency payments or demanding price adjustments.
• Tailwinds – While tariffs present challenges, they also create strategic incentives that may spur M&A activity in select industries. Many companies will target acquisitions that strengthen domestic sourcing, expand U.S. production, or localize supply chains to offset rising import costs. This may create tailwinds in the M&A market for firms offering tariff-resilient capabilities such as logistics, advanced manufacturing, and business services.

U.S. M&A activity in 2025 will reflect defensive and offensive strategies as companies respond to tariff-induced pressures. Strategic acquisitions focused on operational adaptability, domestic sourcing, and supply chain control will distinguish well-positioned market participants despite broader turbulence.

While Q1 2025 U.S. M&A announced deal activity registered a notable 10% decline year-over-year, attributing this downturn solely to tariff policies oversimplifies reality. Though impactful, the tariffs coexist alongside elevated interest rates and tightened liquidity conditions – critical factors restraining leveraged and debt-financed acquisitions that traditionally drive the number of M&A deals. According to Federal Reserve Economic Data (FRED, 2025), persistently high federal funds rates have raised borrowing costs, limiting buyers’ financing options and affecting overall deal volumes.

Moreover, geopolitical tensions, particularly the relationship between the U.S. and China, substantially influence cross-border M&A decisions. EY’s 2025 Capital Confidence Barometer highlights that 74% of executives view geopolitical uncertainties – including tariff policies – as primary reasons for re-evaluation or delaying transactions, intensifying due diligence processes, and extending deal timelines.

Nonetheless, private equity activity remains resilient, supported by over $1.2 trillion in dry powder (Pitchbook, Q2 2025). Tariff-driven supply chain risks shift PE focus toward domestic, vertically integrated targets with pricing power and diversified sourcing.

This section provides a sector-by-sector analysis of how tariff pressures and evolving market conditions influence corporate behavior across key segments of the economy. From securing upstream inputs and mitigating cost volatility to pursuing vertical integration and sourcing diversification, companies actively leverage M&A to navigate challenges and position for long-term resilience in 2025 and beyond. Tariffs are reshaping acquisition criteria. Buyers increasingly favor targets with domestic operations, stable sourcing, and minimal trade exposure. New demand for M&A is being driven directly by tariff dynamics. Industries expected to turn to M&A for strategic solutions include:

Automotive & Auto Parts – Participants in the U.S. automotive industry heavily rely on imported materials such as aluminum, steel, and semiconductors – core inputs targeted by tariffs. Expect reshoring initiatives and joint ventures in battery and semiconductor manufacturing to emerge as prominent M&A themes in 2025.

Business Services – Given their stable demand profiles, the business services sector continues to exhibit resilience as it benefits from minimal direct exposure to tariffs, particularly in healthcare, professional services, and tech-enabled services. In subsequent quarters, businesses with robust domestic operations and inelastic demand structures will likely command premium valuations.

Construction & Homebuilding – As material costs remain elevated, particularly in steel, aluminum, and lumber, M&A activity will pivot toward securing cost-efficient suppliers and enhancing supply chain resilience. Companies emphasizing local sourcing or vertically integrating to reduce tariff exposure will likely drive M&A, potentially stabilizing transaction volumes in the latter half of 2025.

Consumer Electronics & Tech Hardware – With a significant reliance on components from tariff-impacted regions, U.S. tech hardware companies face continued margin pressure. In response, the industry is expected to experience heightened domestic consolidation and increased investment in alternative sourcing channels, with the pursuit of advanced manufacturing capabilities through M&A likely to define deal activity for the remainder of the year.

Food & Agriculture – Participants remain vulnerable to retaliatory tariffs impacting exports and import-reliant costs. With 60% fresh fruit and 40% vegetables imported, tariffs expose the U.S. to rising food prices. This is driving consolidation among growers and distributors focused on cost control.

Oil & Gas – Sector operations are deeply intertwined with global trade, as evidenced by 94% of Canadian crude oil exports flowing into the U.S. and the sector receiving 15.7% of all U.S. CapEx, underscoring its strategic importance and vulnerability to trade-driven disruptions. In response, firms may pursue acquisitions that strengthen control over refining and midstream infrastructure to mitigate tariff-induced cost volatility.

Retail & Apparel – Margin erosion from rising apparel and footwear import costs will drive consolidation to gain scale, improve logistics, and diversify sourcing. Retailers capable of integrating vertically or horizontally to mitigate tariff-related impacts will be positioned advantageously.

Solar Energy – Tariffs directly impact U.S. firms utilizing Chinese solar components, which supply more than 80% of essential materials. The increased costs of solar panels and inverters can disrupt project economics, especially in utility-scale developments, and are likely to influence M&A aimed at securing domestic or tariff-exempt supply alternatives.

Key considerations for acquirers include:

• Risk Mitigation in Deal Structuring – Integrating material adverse change (MAC) clauses and performance-based earn-outs to post-closing outcomes can help manage uncertainty from future tariff shifts.
• Domestic Operational Strength – Favoring targets with resilient sourcing strategies, localized production, and limited dependence on tariff-exposed imports enhances long-term supply chain stability.
• Vertical Integration for Control – Pursuing upstream or downstream acquisitions allows buyers to internalize key inputs and logistics, reducing reliance on volatile external suppliers.