Background
Tariffs have long been a part of U.S. trade policy, especially in regard to China. However, in his second term, President Trump has adopted a more aggressive and expansive tariff strategy, using them not just for economic protectionism but also as a tool to advance political goals.
Outlined in the America First Trade Policy Memorandum, the new administration is focused on reducing the U.S. trade deficit and promoting American economic interests—specifically benefiting U.S. workers, manufacturers, farmers, and businesses. The Reciprocal Trade and Tariffs Memorandum, released on February 13, furthered this trajectory by announcing investigations into unfair trade practices, such as value-added taxes, non-tariff barriers (such as import policies or lack of intellectual property protection), and excessive regulations that negatively impact U.S. economic interests. The results of these investigations, along with proposed remedies, are currently expected by August 11, 2025, with specific reports on the trade relationships between China, Canada, and Mexico currently expected by April 1 and April 30 of this year.
This heightened tariff environment may impact the 2025 international M&A landscape, creating additional layers of uncertainty and risk for multinational corporations as they navigate these changing trade dynamics.
Recent Tariff Announcements
On February 1, President Trump enacted emergency 25% tariffs on all imports from Canada and Mexico, with Canadian oil and energy facing a lower 10% tariff. These measures were announced as a response to the countries’ noncompliance in helping reduce illegal immigration and drug trafficking. The tariffs are currently suspended until March 4, following actions taken by the Canadian and Mexican governments to address these concerns. In turn, both countries have delayed their retaliatory tariffs for now. However, the future of these trade relations is still unclear.
An additional 10% tariff was placed on imports from China, effective February 4, 2025, continuing the trade tensions that have persisted since 2017. In retaliation, China has imposed 15% tariffs on U.S. coal and liquefied natural gas, as well as 10% tariffs on U.S. crude oil. This back-and-forth escalation gives the impression that the trade dispute with China is far from over and could lead to either further tariffs or renewed negotiations.
Effective March 12, 2025, the United States will impose a 25% tariff on all steel and aluminum imports in the interest of supporting U.S. manufacturing.
Implications for International M&A
For multinational companies, international M&A transactions are an essential tool for growth and expansion; however, the emerging trade landscape is forcing companies to reassess their strategies, particularly in terms of strategic alliances (including supply chains) and cost efficiencies. This may involve diversifying across multiple regions to mitigate risk or shifting production to countries with lower operational costs. Similarly, divestiture is expected to become a popular strategy as companies seek to sell off assets in high-risk or unfavorable markets in order to better position themselves for growth and profitability in more stable regions.
While companies in higher-risk countries may experience decreased purchase prices, U.S. acquisition targets may become more appealing due to their lower vulnerability to external pressures and the potential for favorable tax policies. Speculation suggests that the new administration will promote more favorable tax conditions for U.S.-based companies, potentially giving domestic suppliers a competitive edge. Additionally, service-based companies operating primarily within the U.S. are less likely to be affected by tariffs, making them more attractive to potential buyers. The combination of tax incentives, tariff considerations, and a more favorable domestic market could drive an increase in M&A activity targeting U.S. companies, particularly in industries less reliant on global supply chains.
In terms of transaction process implications, one effect is an increased focus on due diligence. Firms will need to conduct more thorough reviews of potential acquisition targets, carefully assessing not only direct suppliers but also the impact of tariffs on tier 2 and tier 3 suppliers, as even smaller, less visible suppliers could influence the bottom line.
As the 2025 M&A landscape continues to develop under the weight of shifting trade policies, businesses will need to balance the pursuit of opportunities with the need to mitigate risks to better position themselves for success in the future.
Dvorak Law Group is a full-service business law firm headquartered in Omaha, NE, providing a wide range of legal services to businesses and individuals. The firm’s areas of expertise include mergers & acquisitions, business law, real estate, financial regulation, estate and wealth transfer planning, and commercial litigation. With a commitment to delivering personalized legal solutions, Dvorak Law Group continues to support innovative ventures in the rapidly evolving geo-political landscape.
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