Navigating the Impact of Recent Tariffs on Tech-Enabled Service Companies

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April 4, 2025
AI Arrow

Recent U.S. tariffs are impacting tech-enabled service companies by increasing costs and investor scrutiny, despite their lack of physical products. This article explores how startups can build resilience through diversified operations, smarter contracts, and automation—turning geopolitical challenges into opportunities for stronger, more adaptable business models in today’s evolving venture landscape.

In an increasingly interconnected global economy, trade policy has  The Indirect but Growing Pressure on Services

From offshore software development teams in Taiwan or Ukraine, to customer support operations in Southeast Asia, to data labeling firms and AI training services across multiple regions—tech-enabled service companies are deeply enmeshed in global supply chains, even if no container ships are involved.

The rising costs associated with tariffs—combined with foreign exchange volatility, regulatory uncertainty, and renewed scrutiny of international labor practices—are putting pressure on these relationships. Service providers abroad may raise prices, shift delivery models, or renegotiate contracts. Meanwhile, domestic labor markets remain tight, making nearshoring or reshoring more expensive. This combination is quietly eroding some of the cost advantages that underpinned many service business models.

Venture Capital Shifts Toward Margin Visibility and Risk Mitigation

As macroeconomic volatility becomes the norm, venture investors are re-evaluating how they assess operational risk. In previous funding cycles, investor focus centered largely on topline growth, product-market fit, and speed to market. Today, there’s a stronger emphasis on how that growth is achieved—and whether the underlying model is resilient under pressure.

Tech-enabled service companies, especially those operating in lower-margin or competitive categories, now face sharper scrutiny. Investors want to understand the company’s exposure to international vendor risk, sensitivity to labor cost inflation, and its ability to pivot if external costs rise sharply. Companies that previously highlighted “capital efficiency” via global labor arbitrage may now be asked to present a Plan B.

This doesn’t mean global operations are off the table—it means investors want to see foresight, optionality, and strategic clarity. Being prepared isn’t just a bonus; it’s a requirement in this funding environment.

Building Resilience Through Operational Flexibility

At 367 Ventures, we’ve always believed that the best founders build infrastructure for durability—not just speed. In today’s environment, that mindset is more valuable than ever. We’re seeing savvy service companies take steps to build resilience into their business models without abandoning their growth ambitions.

Some of the most effective approaches include:

  • Diversifying delivery and vendor footprints: Rather than relying on a single offshore partner, companies are embracing redundancy and agility by blending onshore, nearshore, and offshore options. This allows for faster shifts in capacity if conditions change in one region.
  • Hedging exposure through smarter contracts: Forward-looking companies are locking in multi-year vendor contracts with predictable pricing, escalation clauses, and service-level agreements that protect against sudden shocks in costs or service continuity.
  • Scenario planning and pricing flexibility: With cost structures in flux, the best teams are proactively modeling different economic scenarios and mapping how pricing might evolve to protect margins while remaining competitive.
  • Investing in automation to offset human cost volatility: As labor costs rise globally, some companies are accelerating investments in AI tools, process automation, and low-code platforms to reduce their reliance on headcount-intensive delivery models.

Turning External Pressure Into Strategic Advantage

While it’s tempting to view tariffs and geopolitical uncertainty as purely negative forces, this moment presents a unique opportunity for forward-thinking service businesses. It’s a time to reassess assumptions, tighten execution, and build for long-term adaptability. Those that treat resilience as a core capability—not a defensive maneuver—will emerge from this era stronger, leaner, and more trusted by customers and investors alike.

This mindset shift is already underway. We’re seeing founders reframe global risk as a design constraint rather than a blocker—and in the process, they’re building operating models that are more modular, more responsive, and more scalable. In short, they’re laying the groundwork for the next generation of category-defining service businesses.

Final Thought

Tariffs are just one of many external forces reshaping the business landscape. But for tech-enabled service companies, they’re a potent reminder that global operations come with real risk—and real opportunity. Founders who embrace adaptability, financial discipline, and operational transparency will be best positioned to navigate this uncertain terrain.

The next wave of breakout companies won’t just be the ones with the best ideas—they’ll be the ones that combine those ideas with resilient, global-ready execution.