Trump Administration Policies Chill M&A Activity, Uncertainty Reigns on Wall Street

The election of Donald Trump in November of the previous year ignited hopes for a banner year in mergers and acquisitions (M&A) across Wall Street. Analysts predicted a surge in corporate dealmaking, projecting a potential $4 trillion in transactions, a level not seen in at least a decade. However, the optimism proved premature as Trump’s rapid-fire policy changes and unpredictable pronouncements cast a long shadow over the market, leaving executives and investors hesitant to commit to major deals.

The initial expectation was that Trump’s pro-business stance, characterized by tax cuts and deregulation, would unleash a wave of M&A activity. However, the reality proved far more complex. The administration’s aggressive trade policies, particularly the imposition of tariffs on goods from key trading partners like Canada, Mexico, and China, injected a high degree of uncertainty into the economic outlook.

One specific example highlighted in the article involves a private equity firm engaged in early talks to acquire a small U.S. snack food maker and merge it with a Canadian rival. The firm was optimistic about finalizing the deal this year. Those plans were promptly shelved when Trump threatened to impose a 25% tariff on Canadian goods. The investor in question stated their concerns that the amount of risk that Trump was bringing made the deal unfeasible, and that they would be super aggressive in a world without the uncertainty around the tariffs.

Trump’s tariffs weren’t merely threats. He enacted them, precipitating a global trade war and causing significant disruptions to supply chains and international commerce. The article mentions Trump doubling taxes on imports from China to 20% and levying a 25% tariff on Mexican and Canadian goods. These actions sparked retaliation from other countries, further complicating the landscape for businesses operating across borders.

The article highlights a broader trend across Wall Street, with executives and investors facing roadblocks in both initiating and completing deals. Interviews with over 20 investment bankers, M&A lawyers, private equity investors, and hedge fund managers revealed a pervasive sense of unease and reluctance to proceed with transactions amidst the policy-driven turmoil.

The data supports the anecdotal evidence. The pace of U.S. mergers and acquisitions in the first two months of 2025 was the slowest since the financial crisis. Only 1,603 deals were signed, making it the slowest start to the year by volume since 2009. Total deal volume fell by more than 19%, while the total value dropped by 29% to $248.78 billion compared to the first two months of the previous year. The former CEO of Medtronic, Bill George, stated that these number decreases were due to the uncertainty and that CEO’s don’t know how to run the numbers or to predict what’s going to happen in the future.

S&P Global ratings underscored the severity of the situation, noting that the prospect of higher tariffs and escalating tensions between the U.S. and its trading partners were the top concerns for many U.S. corporate borrowers.

The uncertainty extended beyond tariffs. The article mentions the potential for reciprocal tariffs, additional tariffs on specific products, and even the possibility of 25% tariffs on imports from the EU. These looming threats created a climate of fear and hesitancy, making it difficult for companies to plan for the future and execute strategic transactions.

The impact was felt even in sectors seemingly unrelated to trade. One activist hedge fund, for example, was pressing a $1 billion aerospace conglomerate to consider selling itself. However, the two sides reached an impasse, with a top executive at the company worried that it would not fetch a fair price due to the market volatility and uncertainty in Washington.

The downturn in M&A activity had a direct impact on the financial performance of major investment banks. Keefe Bruyette & Woods analysts downgraded shares of investment banks. The analysts wrote in a report that market uncertainty surrounding tariffs, inflation, interest rates and government policies led to a disappointing start of the year in investment banking, driving investors away from those stocks.

The article also notes that the mood soured on deals even for companies not directly affected by tariffs. Any hint of uncertainty from Washington was enough to chill the atmosphere and cause potential buyers and sellers to reconsider their plans. Hedge fund managers complained that deals they proposed were languishing, stuck in a state of limbo.

Gregory Bedrosian, managing partner & CEO of boutique investment bank Drake Star, explained that potential sellers of companies were choosing to wait until markets stabilized, ensuring that their projected valuations would hold and not be undermined by macroeconomic events.

The slowdown in dealmaking was a key topic of discussion at the 37th Annual Tulane Corporate Law Institute conference in New Orleans, where lawyers, bankers, and executives gathered to discuss the issues affecting the industry.

Despite the prevailing gloom, some on Wall Street remained optimistic that Trump’s policies on taxes and regulation would eventually pave the way for megadeals. Several senior dealmakers at top U.S. banks suggested that work was proceeding on potential blockbuster deals aimed at creating mega U.S. companies capable of competing with China. These individuals expected the Justice Department under Trump to be more supportive of such deals compared to the previous administration.

In conclusion, the initial optimism surrounding the Trump administration’s impact on M&A activity quickly faded as the reality of its unpredictable trade policies and overall economic uncertainty took hold. The resulting slowdown in dealmaking had a ripple effect across Wall Street, impacting investment banks, hedge funds, and corporate executives alike. While some remained hopeful for a future resurgence in megadeals, the near-term outlook remained clouded by uncertainty and caution.