The news: Auto parts maker Marelli filed for Chapter 11 bankruptcy, making it one of the first high-profile casualties of the Trump administration’s tariffs.
The Japan-based company, which supplies lighting and other internal electronics to Nissan, Stellantis, and other automakers, blamed tariffs for worsening its already precarious liquidity position and casting uncertainty on global demand.
Why it matters: Marelli’s bankruptcy validates the concerns voiced by six top automotive trade groups in early May. Many auto suppliers have yet to recover from pandemic-era disruptions, which drove up costs while reducing demand. The additional expense of tariffs could very well be the tipping point for many of these companies, which could spark a wave of bankruptcies or stoppages that paralyze auto production and lead to layoffs.
Those concerns are not unique to the auto industry. The combination of higher costs stemming from tariffs coupled with softening demand from consumers worried about their financial health is creating problems even for the likes of Walmart—an extremely troubling sign for the legions of small and midsize businesses that lack the big-box retailer’s ability to negotiate with suppliers and adjust sourcing.
Companies are already feeling the squeeze. The RSM US Middle Market Business Index fell almost 19 points in Q2, its biggest drop since the pandemic.
- While the index is still in expansion territory (for now), gross revenues and net earnings declined for about a quarter of respondents. Many are delaying capital expenditures and reducing hiring in a bid to manage expenses.
- With margins lean, many businesses have had no choice but to raise prices. Nearly 3 in 5 businesses (57%) increased prices in the current quarter, and 63% expect to do so over the next six months.
Our take: Not all of Marelli’s problems can be blamed on tariffs. But tariffs and uncertainty have a way of magnifying the cracks in a company’s business—cracks that will become harder to paper over the longer the Trump administration sticks to its hardline trade policies.