In this report, we examine how tariff uncertainty creates both challenges and opportunities for private capital funds (PCFs) navigating cross-border transactions. We explore sector-specific vulnerabilities and resilience patterns, providing strategic guidance for deal structuring, due diligence, and transactional documentation in an increasingly unstable global trade environment.

Introduction

Global trade is in a turbulent state following the Trump administration introduction in early 2025 of sweeping tariff measures, significantly complicating cross-border transactions. These included a 10% baseline tariff on most imports and targeted 42% tariffs on Chinese goods, with additional country-specific measures affecting key trading partners.¹

While recent developments show some tactical shifts – a temporary pause on certain Chinese tariffs², a new US-UK trade agreement reducing automotive and steel tariffs³, and the EU now facing a 50% tariff after a brief suspension amid ongoing negotiations⁴ – a US federal court blocked the Trump administration’s tariff regime, which was reversed on appeal pending a final decision from the US Supreme Court.⁵ Amidst this continued uncertainty, the overall trend remains clear: trade volatility will likely continue to shape the commercial environment throughout 2025 and beyond.

For PCFs navigating cross-border transactions, these developments create both challenges and opportunities. Funds that approach this shifting terrain strategically will identify value where others may see only risk. PCFs must grasp how specific sectors are affected to value assets accurately, conduct thorough due diligence, and structure transactions effectively. With targeted analysis and forward planning, funds can turn potential disruption into strategic advantage.

Sector-specific impact of tariffs on cross-border transactions

Tariffs are taxes imposed by governments on imported goods, typically calculated as a percentage of the import's value, with the dual aims of raising revenue and protecting domestic industries from foreign competition (although tariffs are generally viewed as being able to achieve only one of these aims to any meaningful extent, normally at the expense of the other).⁶ In certain cases, tariffs can create asymmetric effects across industries due to overlapping factors directly impacting deals and cross-border investment. These sector-specific impacts may stem from variations in supply chains and market positioning, potentially influencing deal valuations for PCFs.

In this section of the report, we provide a roadmap for PCFs by examining relatively vulnerable and resilient sectors through a Red-Amber-Green (RAG) scale, with red representing the most exposed and green representing the least exposed sectors.

The table below sets out a high-level summary of the RAG status of each sector along with a brief description.

Figure 1: Tariff exposure RAG rating by sector

Sectors vulnerable to tariff uncertainty

The current tariff landscape has created distinct patterns of vulnerability across industries, with certain sectors facing disproportionate challenges. The automotive sector confronts a perfect storm with February 2025's baseline 10% tariff, targeted 25% tariffs on UK/EU vehicles⁷, and cascading component-level effects throughout complex global supply chains that defy traditional valuation models.^8/9 Similarly, consumer electronics is one of the most vulnerable sectors following April 2025's escalation of Chinese import tariffs from 125% to 145% (despite the current pause)¹⁰, exacerbated by highly integrated supply chains and limited component substitutability with high-end electronics already facing 20% tariffs before recent increases.¹¹ The pharmaceutical and medical products industry operates under unique regulatory complexity where tariff exemptions and special designations create significant forecasting uncertainty, with European companies reportedly accelerating shifts to US-based manufacturing.¹² Whereas, agriculture and food products present unique investment opportunities despite February 2025's baseline 10% US tariff, benefiting from inelastic demand resilience against price spikes and natural insulation as an essential sector (contributing £147bn or 6.5% of UK national GVA in 2022), though this advantage may be offset by agricultural products embedded in global supply chains subject to European or third-country tariffs.¹³

Charting a course for relatively insulated sectors

In the next section, we explore sectors that benefit from structural insulation against tariffs –although many still face indirect exposure through customer and supplier relationships. For PCFs engaged in cross-border transactions, understanding these nuanced sector-specific impacts is essential for accurate valuation, due diligence, and deal structuring in an increasingly volatile global trade environment.

Sectors better insulated from tariff uncertainty

Tourism and hospitality

• These sectors are naturally insulated due to a service-based model focused on intangible experiences rather than physical goods crossing borders, limiting direct exposure to the 10% tariff implemented in February 2025. However, indirect exposure remains a risk – particularly through tourism demand correlation with broader economic conditions (e.g. UK GDP growth revised downward from 1.6% to 1.1% in 2025).¹⁴
• Geopolitical shifts may also influence international tourism flows, with many travellers becoming less inclined to visit the United States and seek alternative destinations due to restrictive immigration policies.¹⁵
• Transaction documentation may incorporate tariff-related provisions requiring disclosure of cross-border merchandise supply arrangements.  More broadly, earnouts may be used to address lack of confidence in short-term trading forecasts due to uncertainty and other factors influencing customer behaviour. Supplier contracts might need reviewing for change-in-law clauses, and material contracts due diligence could highlight agreements with tariff escalation clauses affecting transaction economics.
• For hotels, purchase agreements may include price adjustment mechanisms based on development stage, with warranties requiring disclosure of procurement arrangements for imported construction materials.
• For restaurants and pubs, warranties may require disclosure of imported ingredient dependencies and domestic sourcing percentages. Food cost volatility mechanisms could be structured with adjustment formulae tied to tariff timelines, with contingent consideration elements linked to sourcing transitions.

Real estate and infrastructure

• Strong natural tariff insulation due to the fixed-asset nature of these sectors, although exposure can arise from construction material sourcing.
• Transaction documentation may incorporate provisions addressing supply chain dependencies, with warranties requiring disclosure of imported versus domestic material procurement.
• Regulatory exemptions for critical infrastructure investments might offer protections for key infrastructure verticals.¹⁶
• Due diligence should assess tenant composition, differentiating between office assets serving service-sector tenants (low tariff impact) versus logistics facilities handling import-heavy inventory (potential valuation pressure).

Education

• Exhibits structural insulation as an inelastic, essential service delivered either in person entirely within a single jurisdiction or digitally, with accelerated digital transformation largely immune to physical goods tariffs. Institutional procurement has shown adaptive capacity – managing 12-18% cost increases through strategic bundling and timeline adjustments rather than service reduction.¹⁷
• Service providers can procure otherwise-tariff-exposed hardware inputs (school supplies, building materials, equipment) from jurisdictions with limited exposure and scale up digital service delivery to promote efficiency and operational resilience.
• Transaction structures may benefit from tailored warranties addressing revenue composition and hardware dependencies, with purchase price mechanisms incorporating sector-specific adjustment formulae. Due diligence should evaluate institutional contract terms and assess regulatory compliance obligations across jurisdictions where educational funding and standards frameworks differ materially.

Professional services

• Strong tariff insulation through service-dominant business models with minimal direct exposure to goods movement.
• Transaction documentation may incorporate warranties requiring disclosure of client concentration in tariff-affected industries.
• Due diligence should also assess revenue diversification across industry verticals, while purchase agreements could include adjustment mechanisms tied to client retention metrics in affected sectors.
• Material contracts review may prioritise retainer arrangements with clients in manufacturing or consumer goods, potentially creating differentiated valuation approaches between firms with diversified versus concentrated client portfolios.

Business services

• Exhibits strong insulation but may face indirect exposure due to deep operational integration with clients.
• Transaction structures may incorporate provisions addressing embedded relationships, particularly where cost-plus or inflation-indexed arrangements differ in tariff resilience.
• Purchase agreements could incorporate adjustment mechanisms calibrated to client industry exposure, with transaction structures potentially separating consulting services from product development to isolate areas of tariff vulnerability.

Financial services

• Naturally insulated through regulatory exemptions from traditional trade policies, with financial products explicitly exempted from tariff regimes.¹⁸
• Transaction documentation should address indirect exposure through client portfolios in vulnerable industries, with warranties requiring disclosure of lending concentrations to tariff-affected sectors.
• Due diligence should assess revenue mix characteristics, particularly fee-to-interest income ratios in stable service categories like wealth management and payments, which typically maintain more predictable performance patterns than other areas.

Software, SaaS, and IT

• Substantial tariff insulation due to digital delivery models, with minimal dependency on physical goods crossing borders.
• Transaction documentation may include provisions assessing potential regulatory shifts, particularly EU-based digital retaliation measures beyond physical goods.
• Due diligence should assess delivery model differentiation, with cloud-native subscription businesses demonstrating stronger margin stability than hardware-dependent services facing indirect tariff exposure via component costs.
• Valuation frameworks may prioritise recurring revenue structures, subscription-based models, and intellectual property licensing mechanisms, ensuring continued resilience against trade policy shifts.

A deep dive on professional services, finance, real estate, and software

Our analysis highlights key macroeconomic dynamics in sector-specific private equity exposure. As shown in Figure 2, consumer discretionary and industrials contribute the most to GDP per capita yet face higher tariff volatility, posing challenges for investors seeking stability. In contrast, financial services and real estate demonstrate strong GDP contribution but remain underinvested by private equity compared to the software/IT industry, which shows the highest PE exposure among surveyed sectors.  

Although professional services does not feature in Neuberger Berman's analysis of private equity NAV penetration and GDP contribution shown in Figure 2, data from the Bureau of Economic Analysis reveals these firms account for a higher percentage contribution to GDP than either financial services or IT, adding nearly $6tr (11.7% of total GDP) to the US economy in Q4 2024.¹⁹ This substantial economic footprint is even more pronounced in the UK, where professional services represents a higher proportion contribution to gross value add (GVA) (£223bn) than either financial services (£208bn) or business services (£125bn).²⁰

Figure 2: Sectors (GICS) by US GDP contribution and PE investment listed by tariff exposure

_{Source: Eissler, Ralph."Tariffs Are Here: What Does That Mean for Private Equity?" Neuberger Berman Insights, February 2025.}

This positioning makes financial services, software/IT, professional services, and real estate particularly compelling, given that Figure 3 shows that total non-US deal volume from 2020 to 2025 was dominated by financial services, software, and professional services firms – a testament to their embeddedness in the economy and potential resilience against trade barriers. Commercial property (real estate), meanwhile, ranked just below automobiles in total deal volume, reinforcing the sector’s steady presence in transaction activity despite varying sector exposure dynamics.

Figure 3: Total non-US deal size by sector, 2020-2025

_{Source: Macfarlanes analysis; Preqin; Bloomberg. Data to 1 May 2025.}

These data points collectively suggest that software/IT, financial services, professional services, and real estate represent a strategic opportunity for private equity investors seeking to balance sector-specific growth potential with tariff insulation considerations in their portfolio build.

Conclusion

Trade volatility looks set to define the investment landscape throughout 2025 and beyond. For private capital funds, this presents both a challenge and an opportunity. Those who develop nuanced, sector-specific approaches to tariff exposure are likely to identify value where others see only risk. While sectors like automotive, consumer electronics, and pharmaceuticals face direct tariff pressures requiring sophisticated risk mitigation, service-dominant sectors – professional services, education, financial services, and software – demonstrate notable structural advantages. Real estate, meanwhile, benefits from both its fixed-asset nature and reduced tariff exposure when tenanted by service businesses. These sectors combine relative insulation from direct tariff impacts with proven adaptability, making them attractive targets for funds seeking more predictable returns in an uncertain environment.

To succeed in these conditions will require getting the details right. Due diligence frameworks need to distinguish between companies with genuine tariff exposure and those with structural protection. Transaction documentation will require more tailored approaches – from warranties that properly address revenue composition to purchase price mechanisms that reflect sector-specific realities. The firms that build these capabilities should gain meaningful advantages in both deal sourcing and portfolio performance.

Trade policy will remain unpredictable, but some patterns are emerging. PCFs that develop stronger sector-specific tariff analysis, adapt their transaction approaches accordingly, and focus on opportunities with structural resilience stand to benefit significantly. With trade volatility likely to persist, the priority becomes ensuring funds can identify and execute on the opportunities this environment continues to create.