President Trump's trade war has rattled stock markets and stoked fears of a recession. That has some in tech worried about how a broader market correction could trickle down to startups.

A tighter economy could force some limited partners to call off investments in venture funds as the value of their public assets tumbles — a phenomenon known as the "denominator effect." This would make it harder for investors to close new funds. They might also whittle down the target size of their funds, recognizing that startups will raise smaller rounds in a funding winter.

"If the tariffs stick, and if we see kind of a broader market correction, you're going to see venture going the same way it has over the last two years, where it's difficult to raise capital and to manage funds," said Marcos Fernandez, cofounder and managing partner of Fiat Ventures. "Unless you have a really differentiated model, it's going to be difficult to weather that storm."

Just as startups have begun to queue up for IPO listings, Trump's latest round of tariffs has raised questions about whether companies will shelve their plans to go public.

"If tariffs affect the equity markets and that affects the trading of tech stocks, then that could affect the ability of later-stage companies to go public," said Justin Stevens, founder and chief executive of Overlap Holdings, a frontier-tech-focused venture capital firm.

Fernandez of Fiat Ventures shared that sentiment, saying the backlog of companies seeking to go public is shrinking as they wrestle with value multiples out of line with their own.

Both Klarna and Hinge Health have filed their S-1s to go public.

The stock market's reaction to the tariffs could hit potential mergers and acquisitions in addition to public listings, said Jordan Nof, managing partner of Tusk Venture Partners.

"The big headline number on the Google-Wiz deal, other M&A activity that's just heating up, and the momentum in the IPO market — this really does throw a wet blanket on all of that," he said.

Investors said startups building hardware or other physical goods could be especially impacted by Trump's new tariffs.

Hardware startups rely on a host of manufacturers that are mostly based in China. Those Chinese manufacturers now face a 54% total effective tariff on goods imported to the US — a combination of a 34% Liberation Day tariff imposed on China and a previous 20% price hike.

Andreas Schwarzenbrunner, a Paris-based general partner at Speedinvest, said industries that depend on complex manufacturing, such as electronics, machinery, and chip production, and hardware-dependent sectors could see spiking costs and supply chain disruptions.

Even healthcare companies could feel the sting of tariffs if they manufacture their drugs and devices offshore, said Sunny Kumar, a partner at Informed Ventures. Those companies "now have to decide whether to pass on these new costs to their customers or absorb them themselves, given the significant time and infrastructure needed to onshore," Kumar said.

However, Overlap Holdings' Stevens maintains that some high-margin businesses in categories such as robotics, life sciences, or space may more easily weather the price hikes. "If you're building a robot, the cost of the metal inputs into the robot is a very small fraction of what you're selling that robot for. And so you have a lot more profit margin to work with," Stevens said.

President Trump said on Wednesday, "Jobs and factories will come roaring back" as he rolled out sweeping tariffs. If that happens, the creation of new jobs could exacerbate an already stretched labor market.

The tariffs may also deter some skilled foreign workers from bringing their talents onshore, said Krish Ramadurai, a partner at AIX Ventures, which invests in the software and biotech industries.

"Tariffs signal a closed-door stance that repels global talent," he said. "The US innovation edge depends on openness, and losing that could prove more costly long-term than any tariff."

However, a manufacturing revival could also lead companies to seek out top global talent.

Sophie Alcorn, a business immigration attorney who advises tech workers and startups, predicts that the construction of state-of-the-art factories, such as Apple's new Houston digs and Hyundai's Georgia plant, will actually create job opportunities for high-skilled immigrant workers.

"The technicality of some of these advanced manufacturing processes is going to require a lot of brilliant talent," Alcorn said. "We will certainly need to rely on brilliant people from around the world to help us build them in the US."

Companies now face a difficult choice: absorb the increased costs or raise prices for customers.

The companies that are best positioned to pass rising costs onto customers are those making and selling "mission-critical" products, said Tusk Venture Partners' Nof.

"If you're providing a mission-critical product to anyone that's a must-have rather than a nice-to-have — groceries, medications, shelter, things you have to have to survive — you're going to buy that regardless, so you'll be more willing to take an incremental increase in price," Nof said. "Everything else starts to get cut."

The same is true for business software. "You're not going to stop buying software altogether," Nof said, but enterprises will become more discerning about the subscriptions they keep.