Canada Braces for Looming Trump Tariffs
The White House will move forward with its plans to up duties on Mexican and Canadian products by 25 percent on March 4, much to the chagrin of brands, retailers and supply chain partners across the North American markets.
Clarifying statements made Wednesday during his first cabinet meeting, in which he appeared to tell reporters that the tariffs would take effect April 2, President Donald Trump announced Thursday in a post on Truth Social that the duties, originally deferred for a month on Feb. 4, “will, indeed, go into effect, as scheduled.” The Commander in Chief alluded to the flow of fentanyl as the reason for the decision.
“China will likewise be charged an additional 10% Tariff on that date. The April Second Reciprocal Tariff date will remain in full force and effect,” he added. The added duty will be charged on top of the 10-percent tariffs imposed earlier this month.
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Following Trump’s early morning social media missive, Canadian Prime Minister Justin Trudeau told reporters at a press conference that Canada “is not the source of problems for the United States” when it comes to the fentanyl crisis, given that less than 1 percent of the drug enters the U.S. through the Northern border.
“If on Tuesday there are unjustified tariffs brought in on Canada, we will have an immediate and extremely strong response,” he added—presumably in the form of retaliatory duties on American-made goods. He’s previously said that the country’s government would levy reciprocal 25-percent duties on $155 billion-worth of U.S. products.
Reports indicated that Mexican President Claudia Sheinbaum is aiming to speak with Trump and attempt to stop the tariff action from moving forward.
But American, Mexican and Canadian producers are bracing for what they say could be catastrophic impact to a well-oiled and integrated regional supply chain.
The National Council of Textile Organizations (NCTO), National Chamber of the Textile Industry (CANAINTEX), and Canadian Textile Industry Association (CTIA) issued a joint statement urging Trump to reach a deal with the nations’ governments in the coming days.
“All three of our countries are partners in a vital textile and apparel coproduction chain that generates $20 billion in two-way trade and helps support over 1.6 million jobs under the United States-Mexico-Canada Agreement (USMCA)—a trade deal that was negotiated during President Trump’s first term in office,” the associations wrote.
The U.S. textile sector ships $12.3 billion—or 53 percent of its global exports—to Mexico and Canada, and many of those inputs re-enter the U.S. market duty-free as finished goods through the trilateral trade agreement.
Meanwhile, Mexico ships $9 billion in textile and apparel goods to the U.S. annually, making it the biggest exporter of fabrics and the sixth largest exporter of apparel to the American market. Canada’s U.S. and Mexico-bound textile and apparel exports ring in at about $1.8 billion, and the U.S. accounts for about 64 percent of Canada’s total exports from those categories.
According to Mathieu St-Arnaud Lavoie, director general of the Metropolitan Fashion Cluster of Montreal (MMODE), which represents about 400 producers, designers, retailers and brands in the Montreal area, the impacts of tit-for-tat duties on both Canadian and American products and inputs could be devastating for a sector that was gaining momentum through the growing interest in nearshoring.
“Since the end of the pandemic, we could feel in the North American ecosystem a reshoring movement,” he told Sourcing Journal. That burgeoning interest has been underscored by the duty-free benefits afforded by USMCA, which allows for the free flow of inputs as well as finished goods between the trade partners.
“You cut and sew it in one of the three countries, then it could cross border duty free—that’s a very good advantage for us,” he added.
U.S. textile manufacturers export $5.3 billion in fabrics to Canada, making the country the third largest single country export market for American mills, according to NCTO data. Much of that product is cut and sewn in Canada and returns to the U.S. market as apparel and outerwear, for example.
With more North American firms expressing a desire to move closer to their end market, mitigate forced labor risks and avoid logistical delays caused by port strike drama or canal shutdowns, Canada has become a shiny and attractive option. “This is where we raise our hand,” St-Arnaud Lavoie said.
The traction has been so pronounced in recent months that Montreal is preparing to host famed French fashion trade show Premiere Vision for the first time in April, an opportunity MMODE has lobbied for as a means of promoting Canadian brands and producers.
But with the critical trade relationship with the U.S. now so fraught with tension and big bottom-line implications, the MMODE lead said he worries that Canadian manufacturers will begin to offshore their operations to save money. That would upend Montreal’s ecosystem for domestic design and production, leaving creatives and multinational brands without a means of manufacturing their products locally and putting Canadian suppliers out of work.
“Both sides will lose domestic production,” he said of the U.S. and Canada. “If there’s less domestic production, then where do I produce my garment?”
The unspoken answer is a familiar one. Even with an additional 10-percent duty, China, with its relatively low cost of labor, might win out.
“If you have hundreds or thousands of employees on your production floor, you ship a lot to the United States, and you cut the trade deal with Mexico and the U.S…. why would you still produce apparel in Canada?” he added.
Trump’s sowing of chaos is creating an air of uncertainty surrounding the future of fashion commerce, and the Canadian reaction has been one of utter confusion, according to Bob Kirke, executive director of the Canadian Apparel Federation, a trade group representing the country’s apparel brands and manufacturers.
“We’re economic rationalists; we agree very much with our U.S. counterparts and we agree with our Mexican counterparts that nothing is broken here,” he said of the North American apparel and textile co-production chain.
Kirke said many Canadian firms are indignant about being hit with duties greater than those being imposed on China. “Why aren’t you beating up on someone that’s actually trading unfairly with the United States?” he said.
If Trump moves forward with his 25-percent duties on Canada—and that’s a big if, given the president’s recent track record—“The Canadian government will do the same, and they are targeting in the first instance the textile products from the United States that are sold here, that are going to the end consumer,” he said. “There’s no scenario in the world where Canada wouldn’t do that.”
Kirke, who liaises with the Canadian government on behalf of the country’s textile and apparel groups, said the first tranche of duties on American-made goods would include finished goods like carpets, curtains, suits, T-shirts, hosiery, jerseys, pullovers, cardigans, blouses, bed linens and table linens, among a host of other consumer goods that the CAF estimates to be worth about $870 million Canadian dollars (about $602 million).
Within a span of two weeks, duties are slated to expand to include textiles and yarns making their way into Canada from the U.S.
Canada generally allows inputs and materials destined for domestic production into the country duty free. “We don’t charge duties on yarns and fabrics that go into manufacturing. [The U.S.] will be the only country in the world subject to those duties,” he added.
The duty-lobbing will be woefully disruptive to the collaboration between American suppliers and Canadian cut-and-sew operators, he added. By way of example, he pointed to American & Efird, a Mount Holly, N.C.-based thread maker that he said is the largest thread purveyor to the Montreal apparel production base. Should Trump move forward with his plan, any Canadian-made finished apparel product made using American & Efird thread will be subject to duties when it re-enters the U.S. market, effectively tariffing a good made with U.S. inputs in its home market.
If—or when—Canada retaliates with duties of its own, that same thread could be subject to a 25-percent tax when it’s imported by producers in Montreal, and that could drive down demand for American made inputs across the board. (Again, why not buy from China if there’s no cost benefit?)
“We are being put into a very unfortunate position of having to do economically irrational actions because the U.S. administration has decided that they wish to pursue a certain trade and tariff strategy,” Kirke said.
What’s more, Canadian and American makers will suffer disproportionately in the trade war, giving the rest of the world a leg up, he believes. Currently, much of Canada’s domestic apparel industry relies (not unlike the U.S.) on offshore production. So, a product made by a Canadian brand in Bangladesh would not be subject to the 25-percent duties when sold into the U.S. This, despite the fact that Bangladesh does not have a free-trade agreement with the U.S., and Canada does.
Kirke said he believes Canadian and American officials need to get down to brass tacks and quit throwing around duty threats and insults. Instead, they should sit down and renegotiate USMCA—now, not in 2026. “They want to renegotiate it. Let’s get at it. No one wants to wait around; let’s do it.”
While Kirke said he’s not sure American brands and producers fully grasp the implications of Canada’s looming reciprocal duties, California producer Dov Charney, the founder of American Apparel and Los Angeles Apparel, is weighing the risks on a daily basis.
“It really hits the ‘Made in USA’ guys the hardest, because we export to those markets,” he said of Mexico and Canada.
Charney, whose Downtown, L.A. operation trades chiefly in blanks made for screenprinting, said, “There’s a special relationship that Canada the United States have had, and it’s particular to the imprintable T-shirt industry.” Canadian recording artists, sports teams, corporations and creatives buy the company’s shirts to be screen-printed domestically, and some of that product makes its way back into the U.S. market, he said.
“There was preference in the Canadian market” for American-made goods, but that attitude is quickly changing, he said. “These products were respected and desired. Now there’s an anti-‘Made in USA’ sentiment in Canada that’s brewing. The United States is being dishonorable by imposing these tariffs and superficially pretending that it’s a national emergency, at least from the Canadian point of view.”
Speaking from his hometown of Montreal, Charney said he’s already experienced the backlash. “People are pissed,” he said. “U.S. companies or distributors that operate within the Canadian space are going to be impacted adversely. It’s not just about the duty. It’s not just about the money. It’s about the spirit of it.”
According to Charney, any drawdown from Canada as a consumer market for American goods could be painful for businesses like LA Apparel. “The Toronto market, the Montreal market, the Vancouver market, the Calgary market—these are well developed markets for our industry. They’re like an extra California, practically, in terms of population,” he said.
The ever-shifting maelstrom of trade battles perpetuated by the current administration are only adding to a roster of headwinds to American small and medium-sized businesses, he added.
“There’s headwinds on the top line, consumer confidence is down, high interest rates, supply chain issues, increased minimum wages and insurance costs, inflation,” Charney said. “You add up all the different friction points that a small manufacturer is going through, or a small distributor or a small screen printer, there’s so many friction points. The small guys are getting slaughtered.”
The manufacturer said he worries that Trump’s bombastic rhetoric could do as much damage to the working relationship between the two countries as the duties themselves.
“The more this goes on, the more they drag the Canadian consumer through this negative sentiment cycle, the worse it is for American companies that are operating in Canada,” he said.
“There’s a sense of betrayal in the Canadian market,” he added, and that ire won’t stop at retaliatory duties on U.S. goods. “It’s about Canadians saying, ‘Time to internationalize and diversify away from the arrogance of the United States.’”
