 Blame it on tariffs: CEOs roll out newexcuse for bankruptcies |
Source |
American Shipper |
Post Date |
07/21/2025 |
|
(Bloomberg) ?When At HomeGroup Inc.? lawyer stood before a US bankruptcy judge last month asking towipe out nearly $2 billion of the retailer? debt, the reason came quick:tariffs.
It? a line that? showingup in more and more courtrooms. Tile importer Mosaic Cos. blamed them in arecent filing. Just weeks earlier, it was auto-parts supplier Marelli HoldingsCo. and aluminum trader Sinobec Group Inc. In all, tariffs have been laid outas a key reason in at least 10 bankruptcies in the US since early April, whenPresident Donald Trump first unveiled a new wave of levies, according to datacompiled by Bloomberg.
But to many economists andanalysts, the tariff blame game doesn? hold up ?at least not yet. For one,it? simply too early for the latest duties to have made a material impact oncorporate performance, especially for companies that typically carry severalmonths?worth of inventory, they say. What? more, recent data showing solidemployment growth, rising wages and a persistently low jobless rate signal thatthe economy is still holding up.
It? the latest chapter ina well-worn corporate bankruptcy playbook, where companies pin their collapseon everything from fickle consumers to currency swings ?even bad weather ?nything but their own missteps. While market watchers say tariffs could eventuallypush a number of struggling firms over the edge, right now they?e seen more asan excuse to paint over deeper problems.
?ompanies are struggling,but the tariffs did not put them into bankruptcy,?said Stephanie Roth, chiefeconomist at Wolfe Research. ?ntil the labor market starts to crack in a realnegative way, there? no great reason to believe that consumers should pullback or that the economy is weakening sufficiently.?
Take At Home, which sellseverything from patio furniture to rugs to generic wall decor. Its woes beganwell before Trump? latest round of tariffs.
Burdened with a high debtload following its 2021 takeover by private equity firm Hellman & Friedman,the impact of the Covid-19 pandemic on supply chains led to rising costs formaterial and labor.
As consumers shifted tosping more on travel and leisure, waning demand for home goods also dentedperformance, leading to credit-rating downgrades and a distressed exchange in2023.
Last month, theTexas-based company said it will close at least 26 of its more than 250 storesas part of its bankruptcy.
At its Rego Park locationin Queens, New York ?one that it plans to shutter ?customers who braved thesummer heat in search of bargains were lamenting its demise.
? am a little sad to see this one go because it? just somuch easier to get something that fits your style,?said Diana Delacruz, 22,who was browsing items at the store? going-out-of-business sale.
A representative for At Home declined to comment.
Marelli, the auto-parts supplier, for its part, said in acourt filing that it was ?everely affected?by headwinds driven by autotariffs rolled out by the Trump administration in March.
But the company, which provides lighting tems andsuspensions to the likes of Stellantis NV and Nissan Motor Co., was alreadyconting with industry upheaval as electrification and automation forcedcarmakers to shift their strategy to cope with declining sales in key markets.
?he market pressures impacting the entire automotiveindustry and lower production volumes we began seeing a year ago, long beforecurrent tariffs were put in place, were the main issues that constrained ourworking capital,?Fernando Vivanco, Marelli? chief communications officer,said in an emailed response to questions.
Sunnova Struggles
Some companies have said that tariffs are just one of anumber reasons they?e struggled. In its June filing, Sunnova EnergyInternational Inc. said cuts to government subsidies, inflation and higherinterest rates were curbing demand for their equipment ?while mentioning thatthe latest tariffs were another hurdle.
Prominent names in the sector including SunPower Corp.,Lumio, and Meyer Burger Technology AG? US operations have also filed forbankruptcy over the past year.
A representative for Sunnova declined to comment beyond thebankruptcy filing.
Market watchers say that deping on how current Trumpadministration negotiations play out, tariffs could ultimately play a muchlarger role in bankruptcies in the months ahead. Recent economic indicators ?onsumer sping, retail sales, US factory activity ?already show a dent indemand amid the policy uncertainty. The number of companies at the greatestrisk of defaulting are at an 11-month high, Moody? Ratings said in a reportearlier this week
So far, however, the overall damage to companies has beencontained. S&P Global Ratings said earlier this month that only 31 creditgrade cuts in recent months have been tied to tariffs, less than 1% of itstotal ratings actions.
For now, some say that if plans for a restructuring werealready in the works, Trump? levies may have just served as motivation to filefor bankruptcy sooner.
Some of these ?mell of the private capital people who areadept at using the bankruptcy laws to facilitate a restructure of a businessthat they want to keep but has an unsustainable debt burden,?said Todd Baker,a senior fellow at the Richmond Center for Business, Law, and Public Policy atColumbia University.
|
|
|
|
