This week, we look at how private markets could be affected by the eye-watering tariffs that the US is imposing on its trading partners; the next steps in the democratisation of private assets; and top M&A deals in China.
Asian PE faces tariff jitters
Asian countries are amongst the most severely impacted by the Trump administration’s sweeping tariff regime. It “isn’t built on any careful economic rationale or sophisticated policy design,” according to Nguyen Khac Giang, Researcher in Vietnamese politics at ISEAS Yusof-Ishak Institute.
Vietnam is one of the hardest hit markets, implying Trump’s answer to China using Southeast Asia as substitution to export its goods to the US.
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Even as the federal government last year indicated it would impose a 10% baseline tariff on all imported goods, no one would have imagined it at this level. This is going to cause great anxiety for private equity investors, whose rationale for investing across several sectors in the region was riding on the fact that SE Asia offered an alternative to China.
There is a significant number of private equity-backed SE Asian manufacturing and export-driven companies.
“In the short term, it’s going to kill M&A activity. It’s problematic for PE in SE Asia, because the region has already not seen many exits. The tariff news will make exits even harder,” BDA Partners co-founder and managing partner Euan Rellie observed.
Even as one might argue that only firms with the US as the biggest importer will suffer, the tariffs could crush an entire industry.
Asian countries are expected to make retaliatory moves until the tariff policies take effect on April 9, but Giang contended: “It’s so far off the mark that there’s barely a common ground to stand on.”
How will PE funds work around it? Rellie believes PE is nimble and can adapt quickly, as the industry has always been.
For Vietnam, despite the expected negative impact, at least over the short term, its Prime Minister has affirmed that the country’s GDP growth goal of at least 8% for 2025 remains unchanged.
Higher tariffs on other countries could also possibly lead to some positive flows in India, which will endure 26%, but only if the domestic indicators turn stronger, said Vineet Agrawal, co–founder at Jiraaf.
But Roshan Raj, Partner at Redseer, says that the industry will need more localisation and innovative models to mitigate the severe impact of Trump’s aggressive measures.
