In this article, we analyze how SaaS businesses are facing the challenges posed by recent economic uncertainties and market fluctuations amid new U.S. trade policies under the Trump administration. For founders contemplating an exit, a key question arises: How will tariffs affect my SaaS business?
One of the most powerful things about the software industry is that it’s inherently borderless. You can build a SaaS company from a kitchen table in Bucharest, serve customers across the U.S., and scale to millions in ARR without ever shipping a physical product.
From an M&A perspective, this global accessibility is part of what makes software such an attractive asset class. It’s scalable, capital-efficient, and largely shielded from geopolitical frictions like tariffs. Unlike industries that rely on physical supply chains or the movement of goods, software businesses operate in a digital-first economy that’s structurally resistant to these kinds of disruptions.
By design, tariffs are tools meant to regulate the flow of physical goods across borders. They were created for things like steel, cars, and cheese rather than lines of code transmitted over the internet.
This distinction is more than academic. While political rhetoric around trade often sounds sweeping, the reality is that most tariffs don’t apply to intangible assets like software, technology licenses, or cloud-based services. Even during previous trade tensions, software companies were largely spared.
Today, most SaaS products are delivered via the cloud on a recurring subscription basis. That model (ongoing access to a service rather than a one-time software download) generally places them outside the scope of traditional tariff regimes. As one trade expert put it: “If it’s a service, there’s no tariff.”
The market’s reaction to the latest tariff announcements was swift and dramatic. In just two days, the S&P 500 dropped 10.5%, erasing nearly $5 trillion in market value. That’s the steepest two-day selloff since March 2020. The specter of a new trade war looms large, and Canada has quickly found itself in the spotlight.
This raises a logical question for software founders operating out of Canada but serving U.S. clients: Could SaaS be next?
Legally, software remains largely protected. The U.S. is party to a World Trade Organization agreement that prohibits customs duties on electronic transmissions through at least March 2026. The United States-Mexico-Canada Agreement (USMCA) also includes a specific carve-out for digital goods.
Still, nuance matters. Software classification can vary. For instance, if a U.S. customer views a Canadian SaaS offering as a downloadable product, it could, in theory, be subject to a 25% tariff. But when delivered as a cloud-based subscription (the dominant model today), it is generally exempt.
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Even if software avoids direct tariffs, broader economic uncertainty still casts shadows. As markets react and companies brace for a slowdown, software budgets may come under scrutiny. Tech buyers could delay decisions, stretch sales cycles, and push back renewals.
Recent market volatility reflects that uncertainty. On April 3, 2025, the Nasdaq Composite dropped over 1,600 points, marking its steepest fall since the onset of the COVID-19 crisis. The S&P 500, as we know, and Dow followed suit.
But here’s the thing: SaaS is built differently. Its subscription-based revenue model brings predictable cash flows. Its cloud-based tools are often core to customers’ operations, making them harder to cut. During the 2008 financial crisis, for instance, many SaaS businesses held steady while others faltered. That resilience hasn’t changed.
Even with its advantages, SaaS isn’t immune. Founders eyeing an exit should still stay alert to evolving risks:
At L40°, we believe moments of uncertainty often create windows of opportunity, especially in SaaS. While tariffs and macroeconomic shifts dominate headlines, the fundamentals of software businesses remain sound: global reach, recurring revenues, and structural resilience. These qualities continue to make SaaS one of the most attractive sectors for M&A, even when the broader market feels shaky.
For founders considering a sale, this is a time to act with clarity, not hesitation.
Whether you're exploring your options or preparing for an exit, navigating the current landscape requires more than just timing—it requires perspective, positioning, and trusted guidance.
At L40°, we specialize in helping founders sell on their own terms, with a process tailored to maximize outcomes while minimizing distraction. In a market where borders are tightening, SaaS continues to transcend them, and so should your exit strategy.
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