Trump’s tariff threats could drive a wave of Chinese outbound M&A

China’s outbound mergers and acquisitions (M&A) activity could see a significant uptick as US President-elect Donald Trump’s proposed tariffs push mainland firms to accelerate their globalization strategies.

Experts suggest that fears of tariffs ranging from 60% to 100% on Chinese goods are driving businesses to seek alternatives to mitigate reliance on the US market, according to a report by South China Morning Post.

“More tariffs may mean the globalization of Chinese companies is going to get faster,” said Stanley Lah, Asia-Pacific and China M&A services leader at Deloitte.

“Chinese companies will consider moving faster to look for alternatives in shipping or selling to the US.”

Outbound M&A beats greenfield investments

Chinese companies are increasingly turning to outbound M&A as a quicker way to achieve global market efficiency, compared to greenfield investments like setting up factories or offices abroad.

Despite a frail global M&A environment, Chinese firms see this route as vital.

According to London Stock Exchange Group data, outbound M&A deals by Chinese companies fell 16.5% to $17 billion this year but are showing signs of rebounding in strategic sectors.

Last year, outbound M&A rose 59% year on year to $27 billion, though still far below the $202 billion peak of 2016.

Sectors with Beijing’s blessings drive deal-making

Certain sectors—such as technology, manufacturing, and new energy—are benefiting from government backing, which could sustain the momentum in outbound M&A.

Federico Bazzoni, CEO of investment banking at Vantage Capital Markets, highlighted these areas as prime targets for Chinese dealmakers.

For instance, Tencent Holdings recently acquired Cyprus-based game maker Easybrain for $1.2 billion, and Midea Group bought the climate division of Swiss firm Arbonia for $811 million earlier this year.

“Valuations are coming down, and we’re seeing some activity return,” Bazzoni said.

However, mega deals akin to ChemChina’s $43 billion Syngenta acquisition in 2017 remain rare due to regulatory uncertainties.

Regulatory and geopolitical hurdles dampen mega deals

Geopolitical tensions and complex regulatory approvals continue to weigh on the M&A landscape.

“Geopolitical sentiment is sensitive, and deals are complicated, pushing down the headline deals in recent years,” Deloitte’s Lah said.

Despite these challenges, there is cautious optimism for a rebound in 2025.

“State-owned enterprises and corporates are waiting to see what happens with domestic and US policies before engaging with new targets,” Bazzoni added.

Inbound M&A dims under Trump’s shadow

While outbound activity shows potential, the picture for inbound M&A in China remains bleak.

Trump’s likely intensification of restrictions on Chinese access to advanced technologies such as AI and semiconductors has discouraged US investors from entering the Chinese market.

Although Beijing has reassured foreign investors of its openness, long-term capital remains hesitant.

“Investors are looking to confirm that the country’s efforts to support economic development are sustainable,” said Lah.