CEOs cite tariffs as a key factor contributing to rising bankruptcy rates.

In a recent bankruptcy hearing, lawyers for At Home Group Inc. presented a case for erasing nearly billion in debt, attributing the retail chain’s struggles to tariffs imposed by the federal government. This rationale appears increasingly common in the U.S. bankruptcy courts, where multiple companies across various sectors have cited tariffs as a significant factor in their financial distress. Among the recent filings, tile importer Mosaic Companies and auto-parts supplier Marelli Holdings Co. echoed similar sentiments, reflecting a broader trend of at least ten companies in the U.S. blaming tariff-related impacts for their bankruptcy since April, following new tariff measures announced by the Trump administration.

Despite these claims, many economists question the validity of tariffs as the primary cause of these financial difficulties, suggesting that it is premature to assume that recent trade policies have had a significant impact on corporate performance. Analysts note that most companies maintain a substantial inventory, allowing them to buffer against immediate tariff effects. Current indicators, including steady employment growth, increasing wages, and a consistently low unemployment rate, further suggest that the economy remains resilient.

This situation marks another instance of a familiar corporate strategy where businesses attribute their downfall to external factors—such as consumer behavior, currency fluctuations, and even adverse weather—rather than acknowledging their internal mismanagement. Analysts posit that while tariffs could contribute to financial strain, they often serve as a convenient scapegoat masking more entrenched issues within the companies.

At Home, a retailer specializing in home goods, is experiencing difficulties that predate the latest round of tariffs. Following a heavily leveraged acquisition in 2021, the company has been affected by pandemic-induced supply chain disruptions, escalating material costs, and shifting consumer preferences toward travel and leisure spending, which diminished demand for home products. In a significant restructuring effort, At Home announced it would close a minimum of 26 stores nationwide.

Similarly, Marelli acknowledges being “severely affected” by tariffs but has also faced challenges stemming from major industry shifts toward electrification and automation, which have reshaped the automotive sector. This, combined with decreasing sales in key markets, has strained the company’s resources long before tariffs were introduced.

Some companies, such as Sunnova Energy International Inc., have cited multiple contributing factors for their struggles, including cuts to government subsidies and rising inflation. They acknowledge tariffs as one obstacle among many affecting their performance.

Looking forward, analysts warn that the fate of various companies may hinge on ongoing tariff negotiations and the broader economic climate. Current data indicate that consumer spending and factory activity are showing signs of a slowdown, which could lead to increased bankruptcy filings in the near future. However, a recent report from S&P Global Ratings indicates that the overall impact on credit ratings has been contained, with only a slight percentage of recent downgrades directly attributed to tariffs.

While it remains uncertain how tariffs will influence corporate bankruptcies in the coming months, there is a prevailing view that for many firms, these trade barriers may only hasten pre-existing restructuring strategies rather than serve as the primary cause of financial collapse. As the landscape continues to evolve, it is crucial for investors, policymakers, and consumers to monitor the interplay between such tariffs and the broader economy.

With many companies at high risk of default, as noted in a recent Moody’s report, the ramifications of these trade policies may continue to reverberate through the market landscape, underscoring the complex challenges facing American businesses today.

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