US policies under the Trump administration have unnerved global investors, with the impact of tariffs and trade wars generating significant uncertainty. For private equity investors, the big question is what the short- to medium-term impact could be on the growth and profitability of portfolio companies. Average tariff rates are expected to be 17.8%; a level not seen since 1934. For context, the average rate was 2.5% when Trump took office.
After imposing tariffs of 145% on China, the subsequent reduction to 30% has calmed nerves, to an extent, leading JP Morgan economists to update the bank’s view that a US recession is now not likely1. Nevertheless, the US economy is expected to face pressure. The latest GDP forecasts suggest GDP will grow by 1.4%, compared to 2.8% in 20242 with the US Federal Reserve expecting higher inflation. Inflation is expected to rise to 3%, as the impact of tariffs begin to translate into meaningful prices increases for consumers.
As they watch these policy-led developments impact the economy, PE firms will be carefully assessing what direct impact this is having on their portfolio assets - should management teams pass on higher costs to their end consumers, or absorb the hit and risk squeezing profit margins?
Navigating volatility with precision can hugely impact returns on investment - Roberta Brzezinski, Control Risks
It’s a difficult question. Especially when considering the real impact of tariffs has yet to be fully felt. JPMorgan Chase CEO, Jamie Dimon, has warned that if the data on job growth and inflation deteriorates soon, the impact on consumer sentiment won’t be felt until later in the summer and on in to Q3. His view is the impact of tariffs might disrupt the economy but won’t make the “ship go down3.”
Either way, the uncertainty caused by tariffs, combined with an increasingly turbulent geopolitical climate with the US recently attacking strategic nuclear sites in Iran, is likely to influence how investors approach dealmaking in the second half of 2025. While buyout transactions are long-term investments, GPs will be watching how the current macro environment unfolds as they evaluate opportunities in their deal pipeline.
Caution, discipline, and valuation conviction are going to be key elements of competitive deal sourcing, even though GPs are sitting on $1.2 trillion of global buyout dry powder4.
A pivotal moment for the US economy…BOOM time?
Roberta Brzezinski is Partner and Head of Americas Business Intelligence at Control Risks, a global specialist risk consultancy. Her panel at the North America Summit on the outlook for the US economy will explore the far-reaching implications of Trump-era tariffs and trade wars, the mounting national debt, and the sustainability of fiscal policy.
“We’ll examine how US exceptionalism stands up in a world of geopolitical and technological disruption and what that means for global investors. With volatility becoming the norm, we’ll discuss how investors can safeguard portfolios in an increasingly unpredictable environment. These questions aren’t just timely. They are crucial for anyone making any investment decisions in 2025 and beyond,” asserts Brzezinski
Small market buyouts have historically outperformed every other illiquid asset class and continues to show the greatest probability for outsized returns - Alex Abell, RCP Advisors
President Trump’s One Big Beautiful Bill is designed to unleash the economy and deliver a “Blue-Collar BOOM”. The Bill is a comprehensive bundle of sweeping tax cuts, spending cuts to social programs and major increases in defence and immigration spending. However, after accounting for interest costs on the new debt, the Committee for a Responsible Fiscal Budget estimates that by Fiscal Year (FY) 2034 the bill would:
- Increase debt by nearly $3 trillion, or roughly $5 trillion if made permanent5.
- Increase the deficit to 7% of Gross Domestic Product (GDP) by 2026.
- Double interest costs between 2024 and 2034 to $1.8 trillion (4.2 percent of GDP).
With Trump and MAGA-driven policies reshaping the economic and geopolitical landscape, and a weakening US dollar, understanding how to build robust and diversified portfolios across asset classes will require new creative thinking. From blockchain and crypto in venture capital to real asset plays such as data centres and LNG plants, investors need to understand where growth is emerging. Additionally, business and infrastructure services buyouts, the evolving role of private debt and continuation vehicles will further shore up portfolio strategies.
“These themes matter now because navigating volatility with precision can hugely impact returns on investment,” says Brzezinski.
She tells IPEM that in an environment marked by unprecedented divergence between federal and state-level governance, “our corporate and investor clients depend on us to track and interpret policy developments across critical sectors including energy, medical research, pharmaceuticals, food safety, transportation, emergency planning, and workplace regulation”.
“We are also advising clients on navigating the complexities of shifting trade dynamics, tariff volatility, and currency fluctuations. All of these factors continue to disrupt financial planning and supply chain resilience across their operations and portfolio companies,” she adds.
Are we past peak-US exceptionalism?
A recent article in the Financial Times suggested that US exceptionalism - the idea that the US has a unique role in leading global economic, political, and cultural systems - is diminished but far from dead, noting that while “America’s economic leadership may be increasingly contested, its productivity engine remains a powerful force6”.
While it remains the dominant player in capital markets, and continues to benefit from robust consumer spending, a resilient labour market and pro-business policies (such as tax cuts and deregulation), several factors are challenging the sustainability of this exceptionalism including:
Slower Growth and Rising Inflation: Recent data show the US economy shrank by about 0.3% annualised in Q1 2025, raising concerns about a cyclical end to the period of exceptional growth that followed the pandemic. This slowdown is partly attributed to unsustainable government spending, high budget deficits, and the negative impact of net exports due to preemptive import activity ahead of new tariffs.
Trade Policy Uncertainty: The administration’s “America First” stance, marked by new tariffs and the threat of trade wars, is creating volatility and uncertainty for investors. While deregulation and lower energy costs support growth, the unpredictable approach to trade is making the transition bumpier and dampening global investor confidence.
US-based GPs may find that internationally, the ‘halo’ effect they enjoyed over the last couple of decades thanks to US exceptionalism, may no longer be something they can rely upon.
Performance, not brand, will be the key determinant as they navigate a multipolar, geopolitically turbulent world and find ways to protect their portfolio assets from a range of pressures such as export controls, shifting regulatory priorities, cybersecurity threats, onshoring policies etc. Those with the proven skillset and expertise to know which operational levers to pull are likely to be best placed as GPs build portfolios capable of generating resilient returns over the next decade. This could lead to Increased competition uncovering attractive deals in tariff-resilient sectors such as software technology, business services and healthcare; not to mention sports and entertainment.
US mid-market embraces AI to sharpen competitive edge
Despite the many challenges raising, the US mid-market remains a fertile hunting ground for investors, with myriad opportunities to tap in to megatrends like artificial intelligence, defence tech, telemedicine and biotechnology. GPs are becoming increasingly aware of the ROI, or monetisation potential for generative AI, as use cases move one step on from productivity to enhance operations. Companies are working out where AI tools can best be applied to drive growth, even if this requires a commitment from CEOs to take risks and fail in the process of finding where AI has the greatest potential to scale.
AI M&A deals in 2025 are averaging revenue multiples of 25.8x, reflecting strong investor confidence in the growth and transformative potential of AI-enabled businesses7. Sectors such as data intelligence and large language model (LLM) vendors are seeing the highest premiums, while even more mature segments like marketing tech and computer vision are benefiting from elevated valuations due to AI integration.
Some 91% of US mid-market firms now use generative AI, viewing it as a necessity for maintaining competitiveness and valuation premiums. Market observers expect the valuation gap between AI leaders and laggards to widen, with those failing to adopt AI likely to be acquired at discounts or lose market share to more innovative competitors.
Alex Abell, Managing Partner, and Head of Research RCP Advisors will be presenting, “Combating Market Uncertainty: The Advantages of Lower Middle Market Buyouts,” during the North America Summit.
RCP Advisors makes investments through primary fund commitments, secondary transactions, and co-investing along sponsors focused on the small buyout market.
Abell will be discussing why now is a key moment for the US middle market.
“In this time of significant uncertainty, there are structural advantages in lower middle market buyouts that decreases volatility and correlation to the public equity markets. These structural elements have been in place for decades and are the main reason that small market buyouts have historically outperformed every other illiquid asset class and continues to show the greatest probability for outsized returns,” he says.
In response to the shifting geopolitical sands and a more fractured, multipolar world, US mid-market firms are navigating supply chain disruptions by diversifying suppliers, investing in technology, renegotiating supplier terms, and shifting toward more resilient, less just-in-time-dependent models. Replacing legacy systems with cloud-based solutions is seen as essential for building resilience across the supply chain to withstand ongoing global and domestic uncertainties.
“The smaller part of the market, while certainly slower than previous time periods, continues to see private equity managers deploying capital and creating exits for its limited partners,” Abell concludes.
Biographies:
Alex Abell
Managing Partner
RCP Advisors
Alex is a Managing Partner of the Firm, a member of the Investment Committee, and is active as an Advisory Board member of various underlying funds. He is responsible for the identification and analysis of potential fund investments within RCP’s core strategy and serves as the portfolio manager for the Firm’s SBIC fund-of-funds. In addition, He helps manage the Firm’s research efforts as well as its customized investment solutions and advisory services. Alex has been involved in the private equity industry since 2001.
Prior to joining RCP, Alex founded Atlas Diligence, acquired by RCP, where he developed a unique research and advisory platform focused on advanced analytics and systematic due diligence. Prior to founding Atlas, he worked for BlackRock Private Equity Partners. At BlackRock PEP, he helped lead manager identification and due diligence on private capital fund opportunities as well as diligence on co-investment and secondary transactions. He previously worked at Quellos’s Private Capital Strategies Group, Hewlett Packard’s pension fund investment group, and Cagan McAfee Capital Partners.
Alex holds an MBA from the Stanford Graduate School of Business and a BA, magna cum laude, in International Relations from the University of Pennsylvania.
Roberta Brzezinski
Partner
Control Risks
Roberta manages Control Risks’ business intelligence team across the Americas. With 25 years of principal private equity investment experience, Roberta is focused on helping clients achieve clarity in their investment, M&A and operating decisions for the long haul.
Roberta spent 25 years as a principal private equity investor on behalf of US, Canadian and European institutions, primarily focused on global emerging markets. She also ran a NASDAQ-listed public company.
Roberta holds an MBA from Georgetown University and an AB in medieval Russian history and literature from Harvard College.
She is fluent in Russian and French and has a basic competency in Polish, Ukrainian and Spanish.
