Navigating the impact of global tariff shifts on business valuations
Navigating the impact of global tariff shifts on business valuations
Import tariffs are playing an increasingly pivotal role in international economic policy, especially as geopolitical tensions intensify. Once primarily aimed at shielding local industries, tariffs are now also used as strategic tools in wider policy discussions. The renewed focus on tariff measures could have enduring consequences for global supply chains, business and consumer sentiment, and overall economic performance – shaping both corporate operations and valuation models.
Tariff escalation: a shifting paradigm in business valuation
Recent announcements about global import duties are creating ripples across financial markets. Stock indices have fallen, the US dollar has shown weakness, and commodity prices, particularly gold and oil, have experienced notable volatility. In this environment, investor risk appetite has diminished, and the current climate of uncertainty persists.
Valuation approaches must adapt to volatility
As a result, companies and investors alike need to revisit their valuation methodologies. Standard models based on predictable assumptions may no longer be fit for purpose. Today, valuation inputs must take into account the escalating use of tariffs. Incorporating a range of macroeconomic and trade scenarios enables stakeholders to better anticipate risks and strengthen pricing strategies accordingly.
To navigate valuations in today’s uncertain environment, one must:
- take into account the broader economic context,
- evaluate whether the business plan addresses current uncertainties,
- model several different outcome scenarios,
- adjust discount rates when faced with weaker input assumptions, and
- account for long-term risk in terminal value projections.
Sectoral impacts vary widely
Tariff impacts are not uniform across industries. For example, the industrials sector has outperformed year-to-date, supported by infrastructure spending and restructured supply chains. On the other hand, sectors like healthcare and consumer discretionary, especially those reliant on international sourcing, are facing mounting challenges. Trade barriers, disrupted supply routes, and rising costs are putting pressure on margins and profitability in these areas.
How we can assist you
At Eight International, we leverage advanced financial modelling and scenario-based analysis to evaluate how tariff shifts influence valuations. Our team supports clients in navigating this complexity with clarity and confidence.
Download our whitepaper to explore our insights and practical guidances.
