Are Tariffs Causing Bankruptcies? Why 2025 Looks Like COVID All Over Again.

The COVID-19 pandemic was once the defining shock that drove a wave of corporate bankruptcies. Now, a new pressure is emerging: tariffs. With the suspension of the U.S. de minimis exemption, expanded trade duties, and rising compliance costs, many import-heavy businesses are facing financial strain. The question on everyone’s mind: are tariffs causing bankruptcies in 2025?

Are Tariffs Causing Bankruptcies?

Short answer: Tariffs aren’t the only culprit, but they’re a major accelerant for companies that (1) import a lot of merchandise, (2) have thin margins, and (3) carry heavy debt. In 2025, overall U.S. bankruptcy filings are up double-digits year over year, and restructuring advisers expect elevated volumes to continue. High rates and weak demand are the base case; tariffs add fuel by inflating input costs and choking cash flow.

2025 Tariff Trends You Need To Know

Several recent policy shifts are reshaping the financial landscape for retailers and importers:

• End of the de minimis exemption. As of Aug 29, 2025, imports under $800 are no longer duty-free, hitting cross-border e-commerce brands particularly hard.
• Expanded tariff enforcement. Customs and carriers are applying stricter processes, leading to additional costs and delays.
• Ongoing policy uncertainty. Court rulings have challenged the scope of tariff authority, leaving businesses uncertain about future obligations.

These changes compound already high interest rates and sluggish consumer demand, creating a perfect storm for distressed businesses.

The Effects Of Tariffs On Companies

The effects of tariffs extend beyond higher prices at checkout. Key impacts include:

• Rising landed costs: Import duties increase the overall cost of goods, squeezing margins.
• Working capital pressure: Duties are paid upfront, forcing companies to tie up more cash earlier in the supply chain.
• Operational complexity: Stricter enforcement creates delays and compliance burdens, sometimes leading to stock shortages or markdowns.

For companies already struggling, these pressures can be enough to push them toward restructuring or bankruptcy.

Case Studies: U.S. Companies Citing Tariffs In Bankruptcy Filings

When higher costs and tighter liquidity collide with existing debt, bankruptcy becomes harder to avoid. Two recent Chapter 11 filings illustrate how tariff pressures are surfacing in U.S. cases.:

• At Home (Chapter 11, June 2025): The Texas-based home décor retailer flagged tariff-driven merchandise cost inflation as a key pressure in its Chapter 11 filing—on top of high interest rates, heavy debt, and declining consumer spending.
• Claire’s (Chapter 11, August 2025): In its second Chapter 11 filing in seven years, Claire’s cited rising import costs caused by U.S. tariffs, along with shifting consumer behavior and debt overload, as major contributors to its collapse.

These examples highlight how tariff pressures are directly influencing U.S. bankruptcy outcomes.

Which Industries Are Most at Risk?

Not every sector is equally exposed. The companies most vulnerable to tariff effects include:

• Cross-border e-commerce brands that relied on duty-free shipping under the de minimis rule.
• Retailers with China-heavy supply chains and limited ability to pass higher costs onto consumers.
• Highly leveraged businesses where even a small margin loss makes debt service unsustainable.

Looking Ahead

As trade policy continues to evolve, businesses should expect more volatility. Retailers and importers will need to adapt through supply chain diversification, renegotiated vendor terms, and pricing strategies that account for tariff risk.

For creditors and stakeholders, the takeaway is clear: tariffs are now a meaningful driver of bankruptcy risk, alongside interest rates and consumer demand.

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