Tariffs and Private Equity: Impact of “Liberation Day”

HarbourVest Partners, the global private markets investment specialist, with more than $143 billion of assets under management as of December 31, 2024, today shared commentary from the firm’s Senior Market Strategist, Scott Voss on the recent tariff announcement.With April 2nd behind us — a day we hoped would bring clarity — the path ahead remains uncertain. We need only look at global public markets to understand the implications. As financial investors, public markets are our barometer. Private markets, with their longer durations, will dampen the volatility seen in public markets but are subject to the same underlying uncertainties.The markets are worried about immediate threats like inflation and a global recession. They are also concerned about the potential rebuild of the global supply chain, its duration, and its future state. These changes represent a conscious reset of the post-World War II economic order.

The most notable reciprocal tariffs

April 2nd did not provide answers; it merely posed the first question in this game of Jeopardy. The most notable reciprocal tariffs were against China (54%), Cambodia (49%), Vietnam (46%), and Sri Lanka (44%). Japan and Europe, though lower on the list, should not be ignored. As the world diversified away from China, alternatives like Cambodia and Vietnam were added. However, tariff tactics have largely mitigated these diversification efforts. Notably, Canada and Mexico were exempt from the Liberation Day tariffs, presenting opportunities for US border trade partners.The second Jeopardy question is how markets and stakeholders will respond. On April 3rd, global equity markets plunged, oil and USD fell, and gold continued its historic rise. Volatility and uncertainty have been prevalent and will likely remain so through 2025. The follow-up question is how our counterparts will retaliate. Already, China has imposed reciprocal tariffs of 34%. Others may follow.As private-market investors in an illiquid asset class, long-term duration is our ally. Private market investments will likely end up in the same place as public market investments over time, but without the interim drama. While there is anxiety about not being able to sell immediately, public market investors face the same dilemma daily.