Canadian fashion brands are grappling with the impact of Washington’s steep new tariffs on garment-making hubs like China, India and Vietnam.
“One of my members called this ‘tariff hell,'” said Bob Kirke, executive director of the Canadian Apparel Federation.
Retail groups in the U.S. have similarly warned that tariffs on Asian countries, where most American clothing is manufactured, will mean a steep uptick in prices ahead of the back-to-school season.
While the Canadian apparel sector wasn’t targeted directly by the tariffs, many companies headquartered here make their products overseas and sell to customers south of the border.
Canadian retail giants like Aritzia, Lululemon and Gildan saw their stock tumble after the tariffs were announced last week by U.S. President Donald Trump.
Access to the U.S. market is critical for brands in this country if they hope to grow past a certain point, says Emma May, founder of the Calgary-based womenswear brand Sophie Grace.
“The U.S. market’s amazing, it’s huge,” said May, who has customers on both sides of the border. “We solve the same problem for the U.S. customer that we solve for a Canadian customer and there are 10 [times as many] of them.”
But May is starting to reconsider some of her U.S. expansion plans.
Her clothes are made in China and warehoused in Canada, where they are shipped to U.S. e-commerce customers. On top of an additional 34 per cent tariff on Chinese goods imposed last week, the White House has also said a previous exemption, that allowed small orders from China into the U.S. without tariffs, is closing.
“Maybe the U.S. market is just not something we can go at because our products will end up being just far too expensive for that customer,” said May.
It’s unlikely the U.S. will allow loopholes for Chinese-made products that make a pit stop in Canada before being sold in the U.S., says trade lawyer John Boscariol.
The Trump administration “is trying to close up any loophole or potential exemption,” said Boscariol, a partner with McCarthy Tetrault in Toronto.
And while clothing is a prime example, Boscariol says many Canadian businesses are likely dealing with the same problem.
“Whether you’re in clothing, apparel items, toys, whatever… whether that’s China, Vietnam or any other country in Asia that’s now been targeted with very significant tariffs, you’re going to be impacted by this in terms of your access to the U.S. market.”
Why not change factories?
Jeremy Oldland, co-owner of the Montreal kids clothing company Hatley, manufactures his products in China and India. He supplies pint-sized rain boots, pajamas and jackets to department stores, boutiques and e-commerce customers south of the border.
U.S. sales make up about half his revenue, says Oldland, and he expects that imposing a new surcharge on all those orders will spur a wave of cancellations.
“We’re going to sell less product. It’s going to hurt any way you do it,” he said. And yet shifting supply chains out of Asia to North America would be difficult.
“We don’t have the tradesmanship, the craftsmanship, we don’t have the printing techniques, we don’t have a lot of things [in Canada].”
Kirke, with the apparel federation, says the new tariffs are hitting the industry particularly hard because they seem to come out of left field.
In recent years, growing trade tensions between the U.S. and China have prompted some larger retailers to start shifting production outside of that country, a move that was also driven in part by reports of forced labour in China’s Xinjiang region.
But now, the U.S. is also going after smaller manufacturing hubs like Vietnam, Cambodia and Bangladesh, where companies had previously been trying to diversify their production.
“That’s a hard, hard thing to deal with,” said Kirke.
Kirke says he is glad that the U.S. tariffs don’t hit Canadian-made products, though this is a relatively small portion of the total industry.
The hope, he says, is that Trump will change course and back down on his tariff policy.
As for May, with the brand Sophie Grace, she hopes to continue growing her business — but with an emphasis on customers north of the border.
“We will obviously be looking to retrench in the Canadian market and then also explore other markets like Australia and Europe,” she said.
