Bankruptcies soar as companies grapple with inflation, tariffs

Corporate bankruptcies in the United States have jumped to their highest level in about 15 years, with hundreds of firms collapsing in 2025 as they struggle with a mix of elevated inflation, high interest rates, and aggressive new tariffs on imports. Import‑dependent and highly leveraged companies are being squeezed hardest, especially in industrial and consumer‑discretionary sectors.​

What is happening

• Corporate bankruptcy filings in 2025 have surged to levels not seen since the aftermath of the Great Recession, with roughly 700+ companies seeking court protection through November, the highest tally since 2010.​

• The increase includes a notable rise in “mega‑bankruptcies” by firms with more than 1 billion dollars in assets, indicating stress not only among small businesses but also larger corporations.​

Main drivers: inflation, rates, tariffs

• Many firms cite a three‑way hit: lingering cost pressures from past inflation, higher borrowing costs after several years of interest‑rate hikes, and new broad‑based tariffs that have raised input prices further.​

• Even though headline inflation has eased into the 2–3 percent range, companies are still dealing with elevated wage, materials, and financing costs that were locked in during the earlier inflation spike.​

Role of Trump’s tariff policy

• The current administration’s extensive tariffs on a wide range of imported goods have pushed the effective overall tariff rate to the highest level in decades, with some categories, such as solar materials, seeing effective rates jump from under 5 percent to around 20 percent.​

• Business groups and economists report that import‑reliant firms have been “absorbing the lion’s share” of these tariffs, often unable to pass all costs to consumers without losing demand, which erodes margins and cash flow.​

Sectors under most strain

• Industrial companies tied to construction, manufacturing, and transportation show the sharpest rise in bankruptcies, reflecting their heavy use of imported inputs and sensitivity to financing costs.​

• Consumer‑facing “discretionary” businesses—such as apparel, home furnishings, and some food and beverage producers—have also been hit as price‑squeezed households pull back spending.​

How this fits into the broader economy

• The spike in bankruptcies is occurring alongside solid headline GDP growth (reported around the mid‑4 percent annualized range in recent quarters), highlighting a divergence between aggregate output and the financial health of many firms.​

• Analysts expect insolvencies to remain above pre‑pandemic norms as long as tariffs stay elevated and interest rates remain relatively high, even if overall inflation continues to moderate.​