Venture capitalists are increasingly concerned that President Donald Trump’s so-called retaliatory tariffs could slow investment in technology companies, shake up the already sluggish initial public offering (IPO) market and even shut down some startups, Wired reports. The tariffs, imposed on April 2 and later suspended for 90 days, with the exception of a 145% tariff on Chinese goods, have added uncertainty to companies that rely on global supply chains.
Tom Drummond, managing partner at Heavybit Ventures, told Wired that his portfolio is already assessing who could be hit hardest by the tariffs. “If you’re in hardware, cleantech, or even biotech, you’re in global pain right now,” he says. One of Drummond’s startups, which makes platforms for the Internet of Things, is reviewing its inventory management strategy and looking for suppliers outside of China.
Investor M.G. Seigler notes, “Every partnership meeting is about tariffs.” He believes hardware companies will be hit the hardest, and venture capital funds are “preemptively avoiding hardware startups.”
Chip Gizard, co-founder of Flybridge Capital, warned in a recent address to more than 400 founders that “capital markets are in turmoil” and that institutional investors may “freeze funding.” He advised startups to close their current funding rounds as quickly as possible and plan their spending carefully.
Charles Hudson of Precursor Ventures said his fund has stakes in several e-commerce startups that could be “significantly impacted” by the tariffs. He also predicts a revival in the secondary private equity market as IPOs and acquisitions become more distant.
PitchBook data is already showing the first signs of change: the share of American investment in European and Chinese deals has declined, and a KPMG report suggests the postponement of major IPOs, including Chime, StubHub, and Klarna.
But not all investors are pessimistic. Some see opportunities in defense technology, logistics and artificial intelligence – sectors that either avoid Chinese supply chains or help customers navigate economic uncertainty.
But for now, venture capital funds have no choice but to adapt to the uncertainty in the US economy. “Nobody knows what’s going on there,” Drummond concludes wryly. “Only time will tell whether these tariffs will be lifted or whether Trump will go all the way.”