Bankrupt Retailers Blame Trump Tariffs, Economists Shrug at Convenient Scapegoat

Legal battles over tariffs imposed by Donald Trump are rippling through New York’s business community, raising questions about the durability of the city’s commercial fabric in a protectionist age.

When At Home Group, a retail chain with over 250 stores, sought shelter under bankruptcy protection in April, it aimed a finger squarely at Washington. Its lawyers blamed the swelling tide of tariffs—those signature bulwarks erected during Donald Trump’s tenure—for nearly $2bn of suffocating debt. It was not alone. Over the course of a few weeks, at least ten American firms, including Mosaic (an importer of tiles), Marelli Holdings (a car-parts supplier), and Sinobec Group (which trades aluminium), took to court dockets to accuse the former president’s tariffs of helping to topple them.

These legal arguments have grabbed headlines from coast to coast, but especially in New York City, which houses a uniquely vast ecosystem of importers, retailers, and service providers. The city’s courts, accounting firms, and restructuring advisers find themselves parsing document after document in which tariffs feature as the culprit for financial tumult. Yet many economists and legal analysts remain sceptical. Stephanie Roth of Wolfe Research, for instance, wryly notes that tariffs became binding only in April, with the next wave set for August: “The firms are in trouble, certainly. But tariffs didn’t bring them to their knees overnight.”

Companies, nevertheless, reckon that narrative has power in bankruptcy proceedings. Citing an audible shock from import levies—often 10%, 25%, or more on Chinese and Brazilian wares—they hope to win sympathy from judges and creditors. The effect is as much rhetorical as calculable, since managers seeking leniency with debt-dismissal cite tariffs to present themselves as victims of geopolitics, not just bad bets or poor governance.

What’s at stake for New York is twofold. First, as America’s principal entrepôt and an erstwhile champion of global trade, the city boasts an outsized share of firms whose fortunes are bound to the tides of international commerce. For them, abrupt shifts in the rules of trade, or even the perception thereof, can upend finely balanced supply chains. Short-term inventory hoarding—from retailers anxious to preempt cost spikes—gums up logistics but may merely defer the pain, not erase it.

Second, these bankruptcy pleas portend a climate of legal and financial uncertainty. While a decade ago, firms typically blamed “changing consumer preferences” or “disruptive technologies” for financial swoons, now they invoke the language of cross-border conflict. Law firms like Weil Gotshal and Cleary Gottlieb, fixtures of the metropolitan bankruptcy bar, must now grapple with the intricacies of international trade policy when untangling corporate failures.

Tariff talk and the city’s bottom line

Such wrangling harbours wider reverberations. New York’s economy, which has recently shown robust headline figures—tepid unemployment, buoyant wages, and stable consumer spending—may yet feel a chill. Should court arguments blaming tariffs prevail, they may embolden further claims and inflate restructuring costs. That could, in turn, affect lending conditions, as creditors become more circumspect about risk in sectors exposed to global commodity flows.

Politically, the drama is not without irony. Mr Trump, a New York fixture before and after his presidency, remains an avatar for a protectionist turn that runs against the city’s commercial instincts. Wall Street, too, frets that a world of tit-for-tat tariffs could dim the outlook for global equities and squeeze the profit margins of the city’s big banks and asset managers, who earn handsomely from cross-border deals.

Nationally, New York is not unique in feeling such tremors. Cities with major ports—Los Angeles, Houston, Savannah—also watch closely as imported goods grow pricier and arbitrage opportunities shrink. Yet the city’s concentration of high-value trade, and its unrepentantly global character, make it peculiarly vulnerable if countries like China or Brazil retaliate with new levies of their own, as Brazil’s president, Luiz Inácio Lula da Silva, has lately hinted.

Globally, the rise of protectionist rhetoric in the United States echoes trends elsewhere. From Britain’s Brexit travails to India’s recent curbs on semiconductor machinery, cross-border commerce has rarely seemed less assured since the turn of the century. In New York, where even a minor hike in input costs can cascade through tiers of suppliers and retailers, a resurgence of tariffs bodes risk—albeit not ruin.

Still, it would be hasty to simply credit political posturing for this spate of bankruptcies. As Ms Roth and other analysts contend, macroeconomic indicators do not signal an imminent wave of corporate distress. While a handful of unlucky or mismanaged firms may founder, there is scant evidence to suggest systemic peril. The attribution of every commercial hiccup to tariffs may be less an exercise in forensic accounting than an exercise in optics.

We are tempted to recall that adversity has visited New York’s business community before—in the dotcom bust, the 2008 financial crisis, and the pandemic. In each case, resilience proved more than a platitude. The city adapts. If recent courtroom dramas are any guide, perhaps the principal risk is not the spectre of tariffs themselves, but the durable temptation to outsource blame for failure, whether to the White House, Beijing, or Brasília.

For now, New Yorkers will keep plenary calendars as judges attempt to unpick the tangled web of geopolitics and insolvency. Lamenting tariffs is unlikely to supplant the hard work of fiscal prudence, clever logistics, and old-fashioned hustle. The city’s business climate, as always, will ultimately be forged by those who navigate adversity, not those who merely grumble about it. ■