The ongoing trade war initiated by the Trump administration has significantly affected the global recovery in private equity deal activities.

Recent estimates suggest that the anticipated recovery in this sector, which had been expected for some time, is receding.

This downturn follows President Trump's announcement of tariff impositions, dubbed 'Liberation Day'.

According to projections from a consulting firm, the value of private equity buyout deals is expected to decline by 16% in the second quarter of 2025 compared to the first quarter of the year.

In April, the value experienced a drop of 24% compared to the monthly average for the first quarter.

Industry insiders had anticipated a surge in deal-making during Trump’s second term, attributing this expectation to a more business-friendly approach and regulatory relief intended to end a two-year stagnation in the sector.

However, the uncertainty created by the trade policies and related tax reforms has effectively stalled this recovery, complicating asset valuations and slowing down deals across most sectors aside from those less impacted by governmental policy.

Simona Maier, co-head of alternative capital at a prominent financial services firm, stated that while the market has not completely stopped, it has narrowed, limiting sponsors' ability to engage in deals predominantly in sectors resilient to the imposed tariffs.

An executive from a major UK private equity firm noted that Trump's April tariff announcement, some of which were later postponed or softened, resulted in a significant loss of confidence in potential new deals in the US for the medium term.

This executive expressed uncertainty regarding whether this outcome was as intended by Trump.

As a result, the value of assets sold entirely or partially by buyout funds is projected to decrease by 9% in the second quarter.

Data highlights the escalating challenges facing the private equity sector after years in which difficulties in exiting investments have led traditional supporters, such as pension funds and endowments, to allocate less capital to new funds.

The consulting firm also reported that no buyout fund completed the first quarter with capital raising exceeding $5 billion for the first time in over a decade.

The decrease in dividend distributions to private equity investors, combined with the difficulty in deploying already allocated but uninvested capital, has placed those attempting to raise funds for new buyouts in fierce competition for each dollar of available capital.

Notably, the consulting firm pointed out that new instruments in the alternative asset management sector—including real estate, credit investments, and traditional buyout funds—aim to gather $3 billion from prospective investors for every dollar of capital available.

This disparity represents the highest imbalance since at least 2011.

Jean-Hendrik Horsmaier, a partner at a law firm, observed that there was considerable optimism among investors at the beginning of the year, with many developments on the horizon.

However, he noted that investors are currently focusing on companies that are less impacted by trade barriers.

After two and a half years of turmoil in valuations due to rapid interest rate hikes and increased borrowing costs, private equity firms are finding it challenging to exit investments through traditional routes like initial public offerings or complete sales.

A survey conducted in March revealed that investors in private equity funds expressed growing dissatisfaction regarding partial exits from investments, such as the sale of minority stakes.

Over 60% of investors indicated a desire for more traditional full exits from companies, even if this necessitated selling at lower valuations.