We’re living through the most volatile moment for global trade since the end of the Cold War. While trade policies are shifting by the hour, there’s a real prospect that the U.S. will maintain elevated tariffs on virtually all major trading partners for years to come.
What would sustained tariffs mean for the early-stage technology landscape? We have broken down the impacts, from first-order supply chain pain to second- and third-order effects on customers and capital markets.
1. Hardware gets Harder. Hardware startups, already operating on thinner margins than their software peers, are directly exposed to tariffs that raise the cost of components and materials. With the average tariff on Chinese exports to the US now at 124%, compared to 3% in 2018 and 19% in 2020, these startups face tough, high-stakes choices:
- Absorb the added costs (threatening runway);
- Pass them on to customers (risking competitive position);
- Redesign products around more accessible parts; or
- Reconfigure supply chains altogether.
While domestic alternatives may eventually emerge, that process is slow— especially in sectors like specialty electronics, semiconductors, and rare earths, where domestic capacity is limited and onshoring timelines stretch years, even decades. Meanwhile, friendshoring remains an uncertain fallback, given the evolving nature of global alliances and trade relationships.
Still, there are opportunities. Companies accelerating domestic capacity (like Re:Build Manufacturing) or helping manufacturers flex across component types (like Commonweal portfolio company Proper Voltage) stand to gain from a landscape in flux. We're also seeing promising startups around supply chain visualization and risk assessment as well as tariff optimization software.
2. Ecommerce and DTC Face Pressure. Tariffs create pressure at multiple layers of the ecommerce ecosystem. Direct-to-consumer (DTC) brands—whether selling sneakers or supplements—face rising import costs on goods, packaging, and raw materials. These costs eat into margins or force price hikes that can undercut brand positioning. Meanwhile, ecommerce infrastructure startups—those offering logistics, payments, marketing, or storefront software—feel the secondary effects as their customers grapple with slower growth, squeezed margins, and tighter budgets. Beyond pricing, tariffs introduce volatility into inventory planning and fulfillment strategies—core operating functions for ecommerce startups.
At the same time, companies enabling more resilient sourcing, flexible fulfillment, or better conversion amid pricing shifts are finding strong market demand, like:
- Dynamic pricing engines that help brands adjust strategically;
- Near-shore manufacturing matchmaking platforms;
- Inventory forecasting tools accounting for trade policy volatility; and
- Marketing solutions focused on relatinoship-building over acquisition
3. Distracted Buyers, Delayed Sales. Tariffs don’t just strain supply chains—they complicate purchasing decisions across entire industries. Enterprise buyers in manufacturing, aerospace, heavy equipment, consumer electronics, and agriculture are among the hardest hit, as input costs rise, margins tighten, and budgets get reforecasted. For startups selling into these sectors—whether offering software or tech-enabled services—this uncertainty often translates into longer sales cycles, frozen pilots, and delayed purchasing decisions. Even when a startup’s value proposition is strong, economic turbulence makes buyers more hesitant to take risks or onboard new vendors. In a tariff-stressed environment, even great products can end up interminably delayed in procurement.
4. Capital Markets Pull Back. The past few weeks have brought some of the sharpest volatility in capital markets since the early days of the pandemic. As investors price in trade tensions and broader economic uncertainty, access to capital may tighten. We've already seen companies like Chime, StubHub, and Klarna delay planned IPOs. That chill flows upstream: as liquidity prospects dim, venture firms grow more cautious, and startups feel it fast. New rounds get smaller, diligence gets slower, and investors tend to prioritize existing portfolios over new bets—especially in capital-intensive or geopolitically exposed sectors.
