It’s the most beautiful word in the English language. “Tariffs.” Well, that is according to President Donald Trump.
But what exactly is it? A tariff is a tax imposed on imported or foreign goods, thereby increasing their cost. Tariffs are not unique to the United States. Governments worldwide use tariffs to make their domestic products more competitive in the global marketplace and protect specific domestic industries against cheaper foreign alternatives. For the United States, which began heavily outsourcing manufacturing starting in the 1980s, tariffs are also a tool to incentivize a reshoring of domestic supply chains.
WASHINGTON, DC – MARCH 26: U.S. President Donald Trump displays a signed an executive order in the Oval Office of the White House on March 26, 2025 in Washington, DC. President Trump announced 25% tariffs on all foreign-made cars. (Photo by Win McNamee/Getty Images)
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On April 2, 2025, Trump announced much higher tariffs than expected on nearly all U.S. trading partners. It was his self-proclaimed “Liberation Day,” though just four days later, the S&P 500 and Dow Jones Industrial Average both fell by more than 10%.
Facing rattled equity and bond markets, on April 9, Trump announced a 90-day pause for most of the tariffs he’d announced just a week earlier, except those against China. The weeks after this initial pause have been a rollercoaster. Although the S&P 500 has recovered all its losses from the post-Liberation Day drop, bond markets remain shaky.
From seasoned investors and portfolio managers to ordinary individuals who only check their 401(k)s once a year, people should recognize that in a tariff-heavy environment, traditional equity and bond markets may struggle. As these traditional markets attempt to recalibrate to this new economy and speculate on the outcome, investors have options in the alternative investment space.
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TOPSHOT – Chinese made cars, including Volvo and other brands, are seen at the port in Nanjing, in China’s eastern Jiangsu province on April 16, 2025, as they wait to be loaded onto ships for export. China told Washington on April 16 to “stop threatening and blackmailing” after US President Donald Trump said it was up to Beijing to come to the negotiating table to discuss ending their trade war. Trump has slapped new tariffs on friend and foe but has reserved his heaviest blows for China, with 145 percent on many Chinese imports even as Beijing has retaliated with levies on US goods of 125 percent. (Photo by AFP) / China OUT (Photo by STR/AFP via Getty Images)
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Tariffs, Trade, and Private Equity
Certain private equity (PE) investments offer a strategic advantage in volatile trade environments. According to KPMG’s Q1’25 Pulse of Private Equity Report: “In this environment, PE firms are expected to concentrate activity in tariff-resilient sectors such as technology, business services, financial services, and healthcare — industries perceived as better positioned to weather global trade volatility.”
To speak on a few sectors mentioned in KPMG’s report –
For technology, tariffs on imported components, such as chips, may drive investment into U.S.-based manufacturing, cloud infrastructure, and cybersecurity, where private equity can provide capital growth.
In the financial services sector, certain fintech platforms and private credit lenders operate with minimal exposure to foreign goods or global supply chains.
There are several ways for investors to access these private equity markets.
NEW YORK, NY – FEBRUARY 16: A train conductor stands next to an Amtrak train at New York’s Pennsylvania Station on February 16, 2018 in New York City. Amtrak gave a media tour on Friday to show the progress made on the train service’s ongoing infrastructure renewal work at Penn Station, one of the nation’s busiest. The work includes the complete reconstruction of Tracks 15 and 18 as well as a switching location. Construction, which began January 5 and is scheduled to end May 28, comes after Amtrak’s ‘summer of hell’ repairs in July and August. (Photo by Spencer Platt/Getty Images)
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For example, private equity funds are available to investors. This option involves substantial risk though, as the fund’s success relies on the manager’s ability to create value and sell underlying companies to realize gains.
Another option is the fund-of-funds or multi-manger funds. This option is similar to a private equity fund; however, the underlying portfolio consists not of individual companies but of other private equity funds. This approach allows broader diversification by providing access to multiple asset classes, sectors, investment strategies, and managers, all from a single investment.
Regardless of the private equity investment, it is important to understand that these types of investments carry risks. They are generally illiquid and require an appropriate risk tolerance. They are also most suitable for investors with a relatively long time horizon.
Tariff Talk On Real Estate
While real estate rarely enters the conversation about tariffs, specific subsectors – particularly essential retail and industrial real estate – are uniquely positioned to weather the storm and, in some cases, potentially benefit from the tariff environment.
In their May 2025 Investment Perspective, analysts at Lord Abbett noted, “Within the retail sector, our preference is for grocery-anchored shopping centers that benefit from necessity-based retailers. Marginal malls and power centers are most at risk from a strained consumer. We are keenly aware of possible tenant bankruptcies as retail margins and volumes are potentially squeezed due to tariffs.”
SHENZHEN, CHINA – APRIL 12: A view of the exterior of a Costco Wholesale store with rows of shopping carts lined up in the foreground and the warehouse-style retail building under a cloudy sky, on April 12, 2025 in Shenzhen, China. China has imposed a new round of retaliatory tariffs on U.S. imports, raising duties to 125% in response to the latest escalation by the United States, which increased tariffs on Chinese goods to 145%. The growing trade tensions have further impacted China’s export sector, affecting key industries such as logistics, manufacturing, and cross-border e-commerce. The measures are part of Beijing’s broader strategy to counter rising economic pressure and defend its trade interests. (Photo by Cheng Xin/Getty Images)
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The types of businesses that didn’t close during the 2020 Covid pandemic are the types that are still needed if the economy slows down. When looking at tariffs, you can use the same filter. Regardless of a tariff – is the item a must have or a like to have?
Resilient cash flows continue to come in from tenants with stable demand (i.e., food, medicine), which are more likely to maintain financial consistency to pay their leases.
While essential retail offers stability, industrial real estate offers opportunity. Warehousing, logistics centers, and “Last Mile” fulfillment centers have become increasingly important in a high-tariff environment to support domestic supply chains, transportation, and timely deliveries.
Investors have the typical options of public or private REITs to access these sectors of the real estate market. Another option that pertains specifically to industrial real estate is the Zero-Coupon Delaware Statutory Trust (DST).
In a Zero-Coupon DST, all cash flow is directed to service the property’s debt. Zero-Coupon DSTs typically involve properties leased to high-credit tenants, such as large industrial distribution facilities.
DES PLAINES, IL – MARCH 23: The top of a form 1040 individual income tax return for 2005 is seen atop a stack on the same at the Des Plaines Public Library March 23, 2006 in Des Plaines, Illinois. Americans are preparing for the income tax filing deadline next month whether using tax software, filing on the paper forms or using a tax preparer. (Photo by Tim Boyle/Getty Images)
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So, why would anyone invest in a DST that generates no income? The answer: tax advantages. Although a Zero-Coupon DST does not provide income for investors, it allows them to defer capital gains and other taxes owed from a property sale. Rather than paying the IRS, an investor can reinvest the proceeds into real estate using a 1031 exchange. Another advantage is the investor typically received passive losses that can help defer the taxes on other investments passive income.
While the loss of income may be a downside, investing in a Zero-Coupon DST may be the lesser of two evils compared with paying a large tax bill upfront on a property sale. Additionally, investors can potentially earn a return on their investment when exiting the Zero-Coupon DST if the property appreciates or if the loan on the property is paid down during the holding period (which can span anywhere from 10 to 20+ years). Investors should be aware that a pay down of principal on the loan is considered taxable income by the IRS. Since no distributions are paid in a Zero-Coupon DST, an investor may need to pay out-of-pocket for any taxes owed on this phantom income. Be advised that DSTs available through private placements are highly speculative, illiquid securities and involve the risk of loss of invested money. While tariffs can be a concern for investors, there are alternatives such as Zero-Coupon DSTs, real estate, and even private equity that allow for potential growth.
Securities are offered through Arkadios Capital. Member FINRA/SIPC. Advisory services are offered through Creative Capital Wealth Management Group. Creative Capital Wealth Management Group and Arkadios are not affiliated through any ownership. This material was created for educational and informational purposes only and is not intended as tax, legal or investment advice.