The U.S. bankruptcies have soared to levels not seen in years. Through the first seven months of 2025, 446 large companies have gone under. That number is 12% above the 2020 pandemic wave and the highest for this stretch since 2010. July alone saw 71 filings, the highest single-month count since the COVID-19 shock.
Brands that dominated the 1990s have been quietly fading away. Once a staple of shopping malls and suburban strips, names like Forever 21, Joann's, Rite Aid, Party City, and Claire's have all gone out of business in 2025.
Three other big names—LifeScan Global, Genesis Healthcare, and Del Monte Foods' second holding company—all filed in July with more than $1 billion in assets and liabilities.
Higher For Longer Effect
The culprit? Rates that refused to come down. The "higher for longer" era has devoured small caps.
In the Russell 2000, 43% of companies are now unprofitable, the highest share since 2020. Interest expenses as a percentage of total debt hit 7.1%, the steepest since 2003. That squeeze has pushed companies that were merely limping in 2023 straight into restructuring or liquidation this year.
Still, academia rightfully points out the inflationary differentiator when compared to historical bankruptcy sizes.
"A dollar has lost 19 percent of its value since December 2020," Robert Lawless, professor at the University of Illinois, said for Newsweek. "Similarly, a $2 million bankruptcy today is the same as approximately a $1.4 million bankruptcy in 2010."
Markets now expect the Fed to throw a lifeline. Fed Chair Jerome Powell's latest dovish comments fueled bets that rate relief is coming, and the CME FedWatch Tool gives 87.3% odds of a 25-basis-point cut at the September 17 meeting.
Tariffs and AI Squeeze
Even if rates fall, tariffs are acting like a second choke collar. The effective U.S. tariff rate sits at 17.3%, the highest since 1935. That's already hammered industrial and consumer-facing businesses, which are operating on razor-thin margins. Small companies can't negotiate custom tariff deals like the one Trump struck with the likes of NVIDIA (NASDAQ:NVDA) or AMD (NASDAQ:AMD), leaving them exposed while megacaps glide through.
Layer AI on top of tariffs, and the pain spreads to households. Companies under pressure are slashing jobs at the lower rungs, automating as much as possible. Youth unemployment for recent grads aged 20–24 has averaged 8.1% over the last three months, the highest since 2008.
The broader market unemployment sits at 4.2%, but the Bureau of Labor Statistics data shows mild stagnation. Economic uncertainty is leading companies to adopt a "sit and wait" approach to hiring.
However, if unemployment rises, the situation will squeeze consumers' purchasing power just as tariffs increase prices.
"It's no mystery why the economy is struggling; blame increasing U.S. tariffs and highly restrictive immigration policy," Moody's chief economist Mark Zandi recently wrote on X.
"The tariffs are cutting increasingly deeply into the profits of American companies and the purchasing power of American households," he noted.
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