An apparel company has told a court that tariffs — not fraud — are responsible for its damaged finances, according to a Law360 report on the proceedings.

The argument came in litigation in which the company's financial deterioration is at issue. Rather than attributing the losses to misconduct alleged by the opposing side, the company pointed to the impact of tariff costs on its business as the true cause of its deteriorated financial position.

For apparel sourcing and supply-chain professionals, the claim lands in a familiar context. Import duties have squeezed margins across the sector since the current round of US tariff measures took effect, and companies facing litigation or insolvency are increasingly citing duty costs as a demonstrable, external driver of financial distress.

What does the argument change?

The company's position attempts to shift the causal narrative in the case. If the court accepts that tariffs — a macroeconomic and trade-policy factor outside the company's control — explain the financial decline, the fraud allegations lose their alleged financial footprint. If the court rejects it, plaintiffs gain a template for treating tariff-era losses as evidence of internal wrongdoing rather than external pressure.

Either outcome carries signal for apparel brands and their vendors. Courts, insurers and lenders are now being asked to distinguish between distress caused by duty costs and distress caused by mismanagement or misconduct. Companies that can document tariff exposure — duty rates paid, landed-cost increases, sourcing shifts — are better positioned in that scrutiny than those that cannot.

The report does not yet indicate when the court will rule on the argument or on the underlying claims. The outcome will be one to watch for any apparel business whose balance sheet took a tariff hit while litigation was pending.