Corporate Bankruptcies Surge to 15-Year High as Tariffs and Inflation Crush American Businesses

The final tally is in, and it's sobering: 2025 will go down as the worst year for corporate bankruptcies since the aftermath of the Great Recession. At least 717 companies filed for Chapter 7 or Chapter 11 bankruptcy protection between January and November, according to S&P Global data—a 14 percent increase from the same period in 2024 and the highest rate since 2010.

The casualties include household names that once seemed invincible. Spirit Airlines, the budget carrier that pioneered no-frills flying, filed for bankruptcy twice in less than a year before ultimately ceasing operations. Rite Aid, once the third-largest pharmacy chain in America, shuttered all 500-plus remaining locations. Party City, after 40 years of supplying birthday celebrations and holiday gatherings, closed every store and laid off 12,000 workers with no severance.

A Perfect Storm of Economic Pressures

Business experts point to a confluence of factors that proved fatal for struggling companies. President Trump's tariff policies—which included sweeping duties on imports from China, Mexico, and other trading partners—dramatically increased costs for businesses dependent on foreign manufacturing and supply chains.

"The tariff situations are particularly hitting small and medium-sized firms across the country," said Edward Altman, a corporate bankruptcy specialist at NYU's Stern School of Business. "Entrepreneurs have far less margin for dealing with those higher costs from duties than larger competitors."

The industrial sector was hit especially hard. Companies tied to manufacturing, construction, and transportation accounted for a disproportionate share of filings as they absorbed the full impact of ever-shifting trade policies while simultaneously grappling with persistent inflation and elevated interest rates.

The Death Spiral of Retail

Retail bankruptcies painted an even grimmer picture. A total of 30 retail chains filed for bankruptcy in 2025, though that figure actually represents a decline from the 51 that shuttered the year prior. What changed was the severity: instead of reorganizing and emerging leaner, many of this year's filers simply liquidated entirely.

Party City's second bankruptcy in two years ended not with a restructuring plan but with going-out-of-business sales. The company blamed "an immensely challenging environment driven by inflationary pressures on costs and consumer spending," but analysts noted that the party supplies market had fundamentally shifted toward discount retailers and e-commerce.

Joann, the fabric and craft retailer beloved by quilters and DIY enthusiasts for generations, met a similar fate. After filing for Chapter 11 in January, the company announced all 800 stores would close, putting 19,000 employees out of work. Competitor Michaels swooped in to purchase Joann's intellectual property and expand its own yarn and fabric offerings—a small silver lining for crafters, if not for former Joann workers.

Airlines at the Brink

Spirit Airlines' collapse was perhaps the most dramatic of the year. The ultra-low-cost carrier first sought bankruptcy protection in November 2024 after years of losses, failed merger bids, and mounting debt, becoming the first major U.S. carrier to do so since American Airlines in 2011.

The Florida-based airline had posted a staggering $1.2 billion net loss, with troubles compounded by the collapse of a $3.8 billion merger with JetBlue Airways that antitrust regulators blocked. Its attempted recovery was further undermined by Trump administration tariffs and federal budget cuts, which cooled consumer spending and drove down domestic airfares at the worst possible moment.

By August, Spirit filed for bankruptcy again—its second Chapter 11 in less than a year. Industry watchers noted that the "Chapter 22" phenomenon (as repeat bankruptcies are grimly called) had become distressingly common among retail and service businesses unable to adapt to the new economic reality.

What It Means for 2026

The wave of bankruptcies has reshaped the American business landscape in ways that will reverberate for years. Thousands of retail locations stand empty in strip malls and shopping centers across the country. Hundreds of thousands of workers have been displaced, many without the severance or benefits that previous generations of employees might have expected.

For investors, the message is clear: balance sheet strength and pricing power matter more than ever in an environment of elevated costs and uncertain policy. Companies with heavy debt loads, thin margins, or excessive dependence on imported goods remain vulnerable as tariffs show no signs of abating.

For consumers, the consolidation means fewer choices but potentially stronger survivors. Michaels' acquisition of Joann's brands, for instance, suggests that demand for certain products remains robust—just not robust enough to support multiple competing chains.

"We're seeing a Darwinian moment for American business," said one restructuring advisor who worked on multiple 2025 bankruptcies. "The companies that survive will be leaner, more digital, and more adaptable. But we're going to lose a lot of familiar names along the way."

As 2026 approaches, analysts warn that the bankruptcy wave may not be over. Companies that limped through 2025 on covenant waivers and emergency financing will face day-of-reckoning moments when those accommodations expire. The question isn't whether more bankruptcies are coming—it's which brands will be next.