Global trade policy has rarely felt more relevant to startup investors than it does right now. Over the past year, the U.S. has navigated one of the most turbulent tariff environments in recent memory, with sweeping import duties, major legal challenges, and a landmark Supreme Court ruling all reshaping the landscape. The downstream effects on early- and late-stage companies are increasingly difficult to ignore. In this blog, learn more about how tariffs and trade policy impact startup investing, including the effects on supply chains, valuations, and exit timelines.

The Current Tariff Landscape

Before examining how tariffs affect startup investing, it helps to understand where things stand today. In early 2025, the Trump administration used the International Emergency Economic Powers Act (IEEPA) to impose “Liberation Day” reciprocal tariffs on imports from dozens of countries, with rates on Chinese goods peaking at 125%. In May 2025, the U.S. and China agreed to reduce those tariffs to 10% on each other’s goods, a reduction that was later extended through November 10, 2026.[i]

The landscape shifted again in February 2026, when the legal basis for the broader tariff regime was overturned. The Supreme Court ruled that IEEPA does not authorize the President to impose tariffs. In response, President Trump imposed a 10% tariff on nearly all countries under Section 122 of the Trade Act of 1974, applying to an estimated $1.2 trillion of annual imports.[ii] Those Section 122 tariffs expire automatically after 150 days, by July 24, 2026, unless Congress votes to extend them.[iii] While tariff levels remain elevated compared to historical norms, the bigger challenge for startups and investors may be the uncertainty itself.

The Effect on Supply Chains

Hardware and manufacturing startups typically bear the most direct exposure to tariff shifts. With tariffs of 10 to 50% on electronics from China, Taiwan, and South Korea, startups faced increased bills of materials. Founders had to either absorb the cost, which hurt margins, or pass it to customers, which hurt demand.[iv] And while the IEEPA tariffs have been struck down, substantial tariffs still apply to goods covered under Section 232 and Section 301, such as computers and electronics, electrical equipment and appliances, and fabricated metal products.[v]

Many companies have turned to nearshoring as a mitigation strategy, but it is not a simple fix. A 2025 Deloitte study predicted that 40% of U.S. companies would relocate at least part of their supply chains to North America by 2026.[vi] For early-stage startups still managing runway, that kind of pivot requires capital that many simply do not have.

The Effect on Valuations

Tariff uncertainty has also changed how investors evaluate and price deals. Investors are demanding cleaner metrics, stronger unit economics, and more downside protection, with more structured deals, extended diligence timelines, and a stronger preference for startups that are either highly efficient or strategically positioned within tariff-insulated sectors. Investors are looking for founders who can speak confidently about sourcing strategy, trade compliance, and tariff exposure, and in today’s market, it is considered a mark of real leadership. Investors conducting due diligence may want to treat tariff exposure as a standard line of questioning alongside other traditional red flags.

Not all sectors are equally affected. 2025 marked a decisive turning point for AI investment: for the first time, funding into AI and machine learning startups accounted for the majority of global venture capital deal value, representing 52.7% of the $512.6 billion deployed globally.[vii] Software and AI companies, which generally don’t rely on imported physical components, may be somewhat insulated from direct cost pressures, though secondary effects like enterprise customers tightening budgets can still weigh on growth trajectories. A startup investor’s investment thesis may benefit from explicitly accounting for trade exposure as part of sector selection.

The Effect on Exit Timelines

Tariff-related volatility has also created headwinds for exits, which arguably can be the most consequential impact for private market investors. On the IPO front, several major tech startups postponed their IPO plans in response to sharp declines in tech stock valuations, putting even more pressure on an industry already dealing with a slowdown in both IPOs and M&A activity.[viii] VCs were increasingly advising portfolio companies to prepare for IPO delays of 18 to 24 months.[ix] The IPO market did begin recovering in the second half of 2025, with approximately 202 companies pricing IPOs in the U.S. in 2025, compared to 150 in 2024,[x] but the median age at which a company goes public has increased from 6.9 years a decade ago to 10.7 years in 2025,[xi] and ongoing uncertainty may push that further. For a deeper look at how different exit paths work, see MicroVentures’ posts on navigating startup exits and going public via direct listing, IPO, or SPAC.

On the M&A side, real momentum may come from early-stage startup-to-startup deals driven by team acqui-hires, product consolidation, or market access, and tariff-related cost pressures and lower valuations could accelerate this trend.

Sectors to Watch

While tariffs are broadly disruptive, certain sectors may be well positioned in this environment. Defense tech is a clear example. Venture capital deals in defense technology increased to a record $49.1 billion in 2025, more than doubling from $27.2 billion the prior year, according to PitchBook.[xii] Supply chain technology is another area seeing increased attention, as tools that track shipments, optimize inventory, or offer supplier diversification insights are seeing a spike in demand, with enterprise buyers now budgeting for logistics software that was not on their radar before.

Final Thoughts

Tariffs and trade policy have become meaningful variables in the private market investing equation. From supply chain cost pressures and shifting valuations to a more constrained exit environment, the effects have been felt across the startup ecosystem over the past year. The landscape remains fluid heading into the second half of 2026, with the Section 122 tariffs set to expire in July and further policy changes possible. Understanding how these dynamics work can help private market investors ask better questions, set realistic expectations, and identify the opportunities that tend to emerge even in uncertain macro environments.

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Want to learn more about MicroVentures portfolio companies? Check out the following MicroVentures blogs to learn more:

• The Growth of Supply Chain and Logistics Tech
• Navigating Startup Exits
• Due Diligence Red Flags
• Going Public: Direct Listing vs IPO vs SPAC
• Developing Your Investment Thesis

[i] https://www.congress.gov/crs-product/R48549

[ii] https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/

[iii] https://www.ig.com/en/news-and-trade-ideas/supreme-court-tariff-ruling-260225

[iv] https://www.thevccorner.com/p/2024-tariffs-global-tech-startups

[v] https://taxpolicycenter.org/taxvox/how-supreme-courts-ieepa-ruling-and-new-section-122-tariffs-reshape-costs-across-industries

[vi] https://www.supplychainbrain.com/blogs/1-think-tank/post/41852-how-tariffs-are-reshaping-global-supply-chains-in-2025

[vii] https://www.bestbrokers.com/forex-brokers/the-state-of-ai-venture-capital-in-2025-ai-boom-slows-with-fewer-startups-but-bigger-bets/

[viii] https://fortune.com/2025/04/16/trump-tariffs-dash-hopes-vc-comeback-2025-pitchbook-clogged-ipo-pipeline/

[ix] https://www.sganalytics.com/blog/tariffs-cloud-ipo-for-us-vc-backed-startups/

[x] https://www.clearygottlieb.com/news-and-insights/publication-listing/global-ipo-market-trends-2025-review-and-2026-outlook

[xi] https://www.morganstanley.com/insights/articles/ipo-outlook-2025

[xii] https://www.defensenews.com/industry/2026/01/20/defense-tech-startups-had-their-best-funding-year-ever-in-2025/

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.