2026 Perspectives in Private Equity: Policy, Trade & Geopolitics

This article is part of the “Perspectives in Private Equity” series.

In a dynamic and often unpredictable geopolitical environment, private equity funds must pay ever closer attention to the actions and intentions of governments and policymakers around the world. The past 12 months have been characterized by evolving policy positions and fast-changing cross-border trading relationships, impacting business models and investment theses for institutional investors.

Several public policy developments under the new U.S. administration have materially impacted private equity dealmaking over the past year. The passing of the One Big Beautiful Bill Act (OBBBA) has upended the previous regime as it relates to tax credits, incentives and spending that will impact numerous business sectors, while the trade deals signed by the new President has entered into with international partners include both investment restrictions and requirements that will encourage overseas capital to back U.S. assets.

This year, we expect the administration to remain active on the legislative front, pushing forward a range of initiatives via the executive branch. A hot topic in Washington, D.C. is the proposed new crypto tax framework, while we also anticipate another busy year for international trade policy. For private equity firms, the main concerns must be staying close to legislative changes, increasing multijurisdictional due diligence, implementing contractual protections wherever possible and prioritizing compliance to avoid falling foul of enhanced enforcement in relation to sanctions, anti-money laundering and export controls.

International Trade Regulations and Tariffs

Supreme Court Opinion: As the new administration continues to use trade policy to further its broader national security and geopolitical goals, the Supreme Court ruling on the authority of the president to levy tariffs under the International Emergency Economic Powers Act statute could come any time before the end of June. There is no indication when it will happen and how the justices will vote, with that uncertainty alone creating challenges for markets.

If the Court strikes down the tariffs, more market upheaval is certain in the aftermath as the administration will almost certainly deploy other statutes for tariff authority, which could shift the tariff landscape for almost all countries and products. Continued fluctuation also creates business risks, uncertainty and additional compliance costs for investors.

In addition to Supreme Court uncertainty, ongoing multiple Section 232 investigations could also result in tariffs in key sectors including pharmaceuticals, robotics and industrial machinery. We could also see the administration making changes to existing Section 232 tariffs on steel and aluminum. Further, the review of the U.S.-Mexico-Canada (USMCA) agreement is still underway, all with the potential to create an uncertain picture for private equity firms.

Geopolitical Tensions: While the U.S.-China détente is stable for the moment, cracks in the relationship would be market-moving. We have already seen volatility this year in other regions as well including U.S. action in Venezuela at the start of the year and threats related to Colombia, Mexico and Cuba. Further, the administration continues to threaten tariffs on Europe and other trading partners for foreign policy objectives including Russian oil, Iranian protests, cooperation on Greenland and other foreign policy priorities.

With the transatlantic relationship also under scrutiny as the President seeks ways to obtain greater control over Greenland, we also expect tension to grown with the EU over its implementation of digital trade regulations that target U.S. technology firms. The EU Parliament has yet to approve the US-EU trade deal, which we think is still one to watch.

Technology Race: The administration’s focus on winning the technology race against China is largely centered on AI but also includes turf wars on quantum, biotechnology, and other advanced technology areas. The willingness by the President to loosen export controls is a significant pivot in U.S. policy but is closely related to the AI race and the administration’s goal to maintain global market leadership.

However, in 2026, there are several major questions that will be in the spotlight regarding the AI boom. Front of mind will be rising energy costs to fuel technology growth, the continued uncertainty around semiconductor tariffs, which are key inputs for technological advancement, and the growing community pushback against more development. All will need to be carefully considered by private equity firms looking at potential deals.

Artificial Intelligence

A Regulatory Patchwork: In the absence of a comprehensive federal AI law, federal policy-makers are expected to continue promoting innovation, even as the lack of a unified national framework accelerates a fragmented, state-by-state regulatory landscape. That trend was underscored by the 2025 surge in AI legislation across all 50 states and sweeping new 2026 compliance regimes in jurisdictions such as California, New York and Colorado.

Congressional Action: Following President Trump’s December 2025 executive order establishing a coordinated federal effort to block or override burdensome state AI regulations, stakeholders are awaiting forthcoming White House legislative recommendations to Congress. Those are expected to address federal preemption, competitiveness, and child safety protections, though timing remains uncertain.

Meanwhile, powering U.S. data centers has emerged as a top policy priority, with the administration and Congress seeking to expand domestic build-out, while positioning U.S. firms and technologies to lead global data-center development.

Tightening Export Rules: Lawmakers on both sides of the aisle continue to focus attention on tightening export rules to block foreign access to U.S. AI and chip technology. At the same time, the administration is working to promote global deployment of U.S.-developed “full-stack” AI export packages — spanning hardware, software, models, and applications. The government plans to designate these as priority offerings and levy support through coordinated federal export and financing tools.

Online Safety: We expect Congress and the Federal Trade Commission to continue to scrutinize chatbots and how AI companies measure, test and monitor potentially negative impacts of technology on children and teens.

More broadly, lawmakers continue to explore kids’ online safety proposals, with movement in the House Energy and Commerce Committee. Deepfakes, child exploitation and misinformation remain topics of concern, as demonstrated by recent Senate passage of legislation to allow victims of nonconsensual deepfake pornography to sue the producers and distributors of such content.

The National Defense Authorization Act (NDAA): The NDAA remains an avenue for lawmakers to enact AI-focused provisions, with growing emphasis on contested-environment applications such as electronic warfare, spectrum operations and autonomous sensing. With nearly 30 AI-focused provisions enacted in the FY26 NDAA, we expect expanded federal demand for AI-enabled and electronic warfare-adjacent systems and rising compliance and security expectations for vendors.

Other Technologies: Beyond AI, Congress and the administration are increasingly using the same legislative and funding vehicles to advance adjacent frontier technologies, particularly quantum computing, quantum communications and robotics/autonomous systems. We expect growing federal focus on quantum-resilient security, sensing and optimization applications, alongside expanded support for military, industrial and logistics robotics.

Digital Assets & Crypto

Market Structure Legislation: Following relatively smooth passage in 2025 of the GENIUS Act, which established a comprehensive regulatory framework for payment stablecoins, broader digital asset market structure legislation has proven to be a heavier lift in the Senate.

Since the House passed the Digital Asset Market Clarity Act (CLARITY) Act in July 2025, bipartisan groups of senators on both the Banking Committee and the Agriculture Committee continue to negotiate the upper chamber’s version of the bill.

Both committees of jurisdiction had postponed markups of their respective portions of the bill earlier in the year, and the rescheduled markup in the Senate Agriculture Committee at the end of January turned partisan. The bill was ultimately reported out on a party-line vote. While a setback, both Republicans and Democrats in the markup reiterated their intent to continue negotiating in good faith to reach a bipartisan consensus on their portion of market structure legislation. Meanwhile, the Senate Banking Committee continues to struggle with the stablecoin yield issue, among other policy differences. As such, it’s unclear when or if the Committee will reach a bipartisan agreement to move forward.

Digital Asset Tax Policy: Meanwhile, the House Ways and Means Committee and the Senate Finance Committee have begun work on digital asset tax policy. Reps. Max Miller and Steven Horsford have released a bipartisan discussion draft titled the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields (PARITY) Act. We have also seen Sen. Cynthia Lummis introduce a comprehensive digital asset tax bill, although no Democrats have currently cosponsored the bill.

If consensus can be reached, the goal is to package digital asset tax legislation with a market structure bill. However, if agreement is reached on either a market structure bill or a digital assets tax bill, but not both, it is possible that one could move forward independently without the other.

2026 Legislative Outlook: While digital asset legislation remains a priority, time to legislate is limited in an election year. Committees of jurisdiction and leadership would like to move quickly, but the prevailing view is that market structure legislation needs to pass before the end of Q2, after which members are expected to shift their focus to the midterm elections.

Transportation

The Infrastructure Investment and Jobs Act’s (IIJA) highway and transit programs expire on September 30, 2026, forcing Congress to confront surface transportation reauthorization on a compressed timeline in the middle of an election year. House Transportation and Infrastructure Committee leaders and their Senate counterparts are already laying the groundwork to mark up their portions of a successor bill, and stakeholder engagement around Highway Trust Fund solvency and potential new user-fee structures is intensifying. But the combination of large projected funding gaps, partisan disagreement over how to replace or supplement stagnant gas tax revenues, and a crowded 2026 floor calendar makes it unlikely that Congress will complete a full, multi-year reauthorization on schedule. The more probable outcome this year is one or more short-term extensions of existing IIJA authorities and funding levels, punting the hardest fiscal and policy choices into the next Congress.

Energy

The Energy-Tech Convergence (AI & Data Centers): One of the most significant drivers in 2026 is the voracious power demand from hyperscale data centers. Private equity firms are increasingly targeting "all-of-the-above" energy solutions to provide 24/7 baseload power.

Grid Modernization & "Hard" Infrastructure: With traditional grid buildouts lagging, capital is flowing into alternative transmission technologies and distributed energy resource management.

Natural Gas & LNG Resilience: Despite the broader energy transition, 2026 sees a rationalization of natural gas as a core transition fuel. Private equity interest remains high in integrated LNG export platforms and midstream assets that link upstream supply directly to global markets, fueled by policy shifts that have streamlined permitting and redefined gas as a geopolitical security asset.

The Post-OBBBA Renewable Pivot: Following the implementation of recent tax laws like the OBBBA, the "green" investment thesis has shifted. Private equity firms are moving away from pure-play solar development toward hybrid portfolios and re-powering existing assets. There is also a heightened focus on securing domestic supply chains to manage 2026’s stricter Foreign Entity of Concern rules and tariffs.

Tax

The enactment of the OBBBA in 2025 has reshaped the federal tax policy landscape, reducing near term uncertainty for taxpayers while creating new questions for the years ahead. The OBBBA permanently extended many of the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA), eliminating a significant set of tax cliffs that would have burdened both individual and corporate taxpayers. However, because OBBBA passed on a strictly partisan basis and without Democratic support, its long-term durability may hinge on future political shifts. Areas of significance to private equity stakeholders that may be particularly vulnerable to renewed debate include clean energy tax credits and the treatment of state and local taxes (SALT). Preservation of pass-through entity tax (PTET) elections and avoidance of new corporate SALT limitations was a hard-fought win for taxpayers—but remains an area tax writers may revisit. Similarly, while the President’s calls to eliminate carried interest were ultimately excluded from the final legislation, the issue continues to be politically attractive and could reemerge.

Despite the bill’s size and breadth, the OBBBA left several unresolved issues. The highly debated proposed Section 899 “retaliatory tax” was removed during negotiations between the United States and OECD countries as part of a side-by-side agreement on Pillar Two. Yet U.S. officials have indicated that the measure could resurface if foreign implementation fails to meet expectations, or if digital services taxes –heretofore considered a trade enforcement matter --- persist. Other provisions affecting businesses and individuals were either skirted—such as the expiring CHIPS credit under IRC Section 48D which was made more generous but not extended—or scheduled to expire, such as new exemptions for tipped and overtime wages. These looming deadlines will require congressional attention and could serve as new catalysts for broader tax legislation, along with the risks and opportunities a large tax bill always brings.

Mounting fiscal pressures and global economic volatility increase the risk that revenue offsets excluded from the OBBBA may return in upcoming tax policy and budget debates as lawmakers seek to address other priorities. Moreover, in the event that there is a change in party control of the House and/or Senate in 2027, stakeholders should expect a significant increase in oversight activity that could bring into play issues around affordability, and the adjustment of different tax preferences to punish or reward entities that are seen as either hindering or helping lawmakers’ policy goals. This approach has already surfaced with the introduction of Sen. Elizabeth Warren’s introduction of the American Homeownership Act, which would disallow certain tax deductions for institutional investors in residential property. Additionally, the OBBBA avoided emerging tax topics—most notably cryptocurrency—that are increasingly relevant and likely to rise on Congress’s tax agenda. Both the Senate Finance and House Ways and Means Committee chairs have expressed interest in advancing crypto tax policy in 2026, and a bipartisan draft has already been released in the House. This dynamic environment underscores the need for continued vigilance and engagement with lawmakers on tax policy well beyond the confines of the OBBBA.

Health

Major federal health policy shifts are underway, with broad changes affecting federal health programs, including Medicare and Medicaid, prescription drug pricing, and public health agencies. The second Trump administration has been vocal about its focus on reducing federal spending, cutting the cost of prescription drugs, addressing fraud, and reducing regulatory “red-tape.” Last year, the OBBBA resulted in healthcare spending cuts, especially in the Medicaid program, and established rules that impact coverage and eligibility for federal programs.

On Tuesday, February 3, 2026, President Trump signed into law a bipartisan health care package that funds the Department of Health and Human Services (HHS) through September 30, 2026. In addition to funding HHS, the package included extensions of several healthcare-related policies that were set to lapse or expire, including: averting an $8 billion payment cut to Medicaid disproportionate share hospitals (DSH), reauthorizing Medicare rural hospital designations, retaining a Medicare hospital-at-home demonstration program through 2030, and extending certain telehealth flexibilities through 2027. 

A focus on decreasing the cost of health care for Americans is expected to continue in 2026, including with regard to:

Drug Pricing: President Trump and officials at the Centers for Medicare and Medicaid Services (CMS) continue to negotiate high-profile agreements with pharmaceutical companies that aim to reduce costs for prescription drugs, including GLP-1’s. Additionally, drug pricing negotiations remain underway as part of the Inflation Reduction Act process, with the most recent list of Medicare Part D and Part B drugs selected for negotiation announced in late January 2026.

Affordable Care Act Enhanced Premium Tax Credits (ACA EPTCs): Congressional debate over extending the ACA EPTCs remains ongoing and no bipartisan proposal has yet emerged that has enough support to become law. EPTCs expired on December 31, 2025, and have led to higher premiums and coverage losses for some enrollees, putting pressure on policy-makers to find a solution.

Health Insurance: Congress and President Trump and his leadership team are seeking policy changes that will drive down the cost of health insurance premiums, increasing transparency on pricing and driving the system away from fee-for-service and to a value-based care payment reimbursement system.

Health Services and Technology: Digital health and emerging technologies are fast growing sectors in healthcare. The private sector continues to rapidly innovate technologies, creating greater efficiencies for diagnostics, drug development and with interoperable digital health platforms empower consumers in the health care ecosystem. In the federal space, HHS and its agencies are significantly upgrading their use of technology with a focus on implementing the use of artificial intelligence to streamline complex processes in general agency administration, with drug reviews, research and development to create efficiencies and fast-track the use of this information.

Pharmacy Benefits Managers (PMB) Reform: The recently passed healthcare package included reforms to PBMs, including increased requirements around transparency, greater audit, enforcement and appeals processes for CMS to reduce inflated prices for patients.

Make America Healthy Again (MAHA) Initiative: The MAHA Initiative, spearheaded and largely driven by HHS Secretary Robert F. Kennedy, Jr., is driving much of the policy change at the Department of Health and Human Services. Core objectives include reducing chronic illnesses by focusing on root causes such as poor diet, reducing environmental chemicals, sedentary lifestyles, and overmedicalization of Americans are currently driving policy and regulatory reforms.

Collectively, these developments reflect a shift toward federal fiscal restraint, restructuring of entitlement programs, and reshaping how federal dollars are used to pay for health care, including through insurance coverage.

Venezuela

Venezuela’s transition under interim leader Delcy Rodríguez is coinciding with selective U.S. sanctions relief tied to a new energy framework, under which Venezuelan crude would move to U.S. buyers with proceeds held in protected U.S. Treasury accounts and shielded by executive action.

Caracas has signaled openness to investment – the state-owned oil & gas company PDVSA has confirmed crude‑sale negotiations with the United States, and a partial reform of the Organic Hydrocarbons Law would embed Productive Participation Contracts and create sovereign funds to channel future oil revenues.

While core blocking sanctions on the Venezuelan state remain in place, these steps aim to stabilize commercial channels and improve legal certainty. For private equity, the market is high‑risk but incrementally opening, with earliest opportunities in energy infrastructure and services and broader prospects dependent on political stabilization, regulatory clarity and additional licensing.