Dealmaking slumps over Trump's tariff turmoil. 'It's almost as bad as Covid.'

• Dealmaking on Wall Street has sputtered out in recent weeks, bankers and consultants said.
• It's a reversal of the industry's hopes that 2025 would deliver an M&A and IPO rebound.
• Industry insiders pointed to Trump administration actions that have clouded the economic outlook.

Wall Street's dreams of a dealmaking rebound have been put on hold over Trump's tariff turmoil.

Investment bankers welcomed 2025 with high hopes that Trump's business-friendly, antiregulation policies would lead to a surge in fee-generating deals. Instead, many corporate boards and buyout firms are standing on the sidelines as they wait to see the impact Trump's aggressive trade policies and gutting of federal agencies could have on the economy and stock market.

How bad things are depends on who you ask. Some bankers said corporate dealmaking has merely slowed, while others described Wall Street's bread-and-butter business of M&A and IPOs in more dire terms. What's clear is that no one knows when — or whether — the clouds might lift, raising questions about everything from bonuses to layoffs to hiring.

"A common refrain I hear amongst dozens of sponsors over the last six to eight weeks," said Seth Goldblum, whose firm provides deal advisory services to private equity firms, is that "the uncertainty in and of itself is actually the worst thing."

"A lot of our sponsors are just sitting on the sideline," he said, referring to private equity firms, which are often referred to as financial deal sponsors. The managing director for CBIZ Private Equity Services pointed to the negative impact Trump's tariffs could have on inflation and interest rates as among the issues holding firms back.

"It's a shame. It looked like we were finally getting unstuck," Goldblum said, adding that the deals industry now appears "back to being stuck."

What bankers are saying

Rob Stowe, an equity capital markets banker with Barclays, agreed that 2025 has proved more challenging than many in his field anticipated.

"We are still seeing companies coming to market, and we still expect we'll see companies coming to market, but it's definitely making decisions harder, and it's adding an extra element of caution for corporates and the sponsors that are thinking about raising capital," said Stowe, who heads the division that handles IPOs for the bank's Americas region.

Eric Li, who covers investing banking for research firm Crisil Coalition Greenwich, said his discussions with clients suggest a more dire picture.

Dealmaking, he said, has largely "frozen."

"There aren't any deals going on," Li said. "It's almost as bad as Covid," he added, referring to the dealmaking stoppage that followed widespread stay-at-home orders in 2020 as the deadly virus spread across the globe.

According to the consulting and advisory firm EY, Wall Street started the year strong. In January, there was a 29% year-over-year increase in mergers and acquisitions in the US, valued at more than $1 billion. The consulting firm's M&A data has yet to be released for February, however, and that is when the stock market started reacting negatively to Trump's trade policies, sending the S&P 500 down roughly 10% since a high set on February 19 and about 8% since Trump was sworn in on January 20.

Layoffs and hiring

On Wall Street, the big question is what it all means for the bottom line — and how it will impact pay and jobs.

At the end of 2024, investment banks were hiring aggressively as dealmaking heated up in anticipation of a Trump White House. Now, there are questions about whether the momentum will continue.

Brianne Sterling, head of the investment-banking recruiting practice at the financial services search firm Selby Jennings, said hiring hasn't reached the gangbuster levels some had hoped to see when the year started. She said some clients are still interviewing new hires even if they've indicated they'll push off the timeline for filling open roles till later in the year in hopes of improved market conditions.

Still, she feels optimistic.

"I think we will still see hiring," she said. "I just don't think it'll be as aggressive or as much volume as we initially anticipated, but we'll see how the year goes."

Even amid rosier expectations many banks were focused on cutting costs this year, including Goldman Sachs. As Business Insider previously reported, CEO David Solomon has tasked some staffers with finding ways to save money, including by reducing redundancies and moving workers to cheaper locations like Dallas, Texas.

The bank's vice president ranks have been targeted for cuts because their numbers have gotten bloated. The bank even moved its annual headcount-cutting exercise from fall to spring, when it is set to cut roughly 3% to 5% of its workforce, which stood at 46,500 as of the end of 2024.

Bank of America has also recently cut investment banking roles, including positions in New York, a person familiar with the cuts said. The more recent round of layoffs primarily impacted junior bankers, such as analysts and associates — though some may be reassigned to other roles within the firm, added the person. Earlier this year, the bank also cut more senior positions in a round that amounted to under 1% of the bank's workforce in global markets and global corporate and investment banking, this person added. The cuts were first reported by Reuters.

Sid Khosla, a financial services executive at EY who serves as the firm's banking and capital markets leader, told BI that such layoffs are part of what he calls "the efficiency conversation" among companies seeking to please shareholders — a trend that started before Trump took office. The topic has come up increasingly in talks with clients, particularly in the past three to four months, Khosla said. "It's always the top two or three conversations. Some institutions may think it's a No. 1 conversation."

Whether corporate dealmaking picks back up depends on how long the turmoil lasts, bankers said.

"I think any reasonable outlook is going to be a little clouded here for a while because there's no certainty that the conversations around tariffs and the concerns around the US economy or around interest rates are going to stop," said Stowe, adding: "I also don't think there's any certainty that the current level of volatility will dissipate in the near term."

Reed Alexander is a correspondent at Business Insider covering Wall Street and financial services. He can be reached via email at ralexander@businessinsider.com, or SMS/the encrypted app Signal at (561) 247-5758.

James Faris contributed reporting.