Donald Trump’s so-called ‘Liberation Day’ tariff regime has sent shockwaves through the private equity sector, with major firms including Apollo Global, KKR, and Blackstone seeing significant share price declines, according to a report by the Financial Times.
Apollo and KKR both saw their stock prices drop by more than 12% on Thursday, while Blackstone shares fell nearly 10%. Credit-focused companies like Ares Management and Blue Owl Capital also faced substantial losses, reflecting investor concerns about the potential impact of increased tariffs on economic growth and dealmaking activities.​
The newly announced tariffs include a universal 10% levy on all imports, with higher rates for specific countries – 20% on European Union goods, 34% on Chinese imports, and 46% on products from Vietnam. These measures have raised alarms about a possible slowdown in global trade, which could adversely affect private equity firms that rely on robust economic activity for deal sourcing and portfolio company performance.​
Market analysts are particularly concerned about the potential rise in default rates on low-rated loans, a key area for many private equity investments. The increased cost of imports may lead to higher operational expenses for portfolio companies, squeezing margins, and potentially leading to financial distress. This scenario could be especially challenging for firms with significant exposure to sectors heavily reliant on international supply chains.​
The broader financial markets have also reacted negatively, with major stock indices experiencing their largest one-day decline since March 2020. This downturn reflects heightened investor anxiety over the potential for a global trade war and its implications for economic growth.​
In response to these developments, private equity executives are reportedly reassessing their investment strategies and preparing contingency plans to navigate the increased market volatility. The heightened uncertainty is expected to lead to a slowdown in dealmaking activities, as both buyers and sellers adopt a more cautious approach in the face of escalating trade tensions.
