‘Fighting for our life’: Canadian businesses reel from U.S. tariff shock

While the US$20 billion accounts for only about five per cent of Canada’s annual goods exports to the U.S., the new tariffs appear to disproportionately affect small and medium-sized businesses. Photo by Taehoon Kim/Bloomberg via Getty Images

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Across Canada, companies are losing orders, contemplating job cuts and paying higher costs. For some, the threat is existential.

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Toronto-based Fine Cotton Factory Inc. exports 30 per cent to 50 per cent of its products to the U.S. Since the tariffs kicked in, some U.S. orders have been cancelled or postponed, and new ones from both sides of the border have slowed, according to Executive Vice President Skip Kann. He fears he’ll need let go a small number of his 250 employees as soon as this month.

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“We’re fighting for our life right now,” Kann said.

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Talks between the two countries collapsed Aug. 21, triggering 50 per cent U.S. tariffs the next day on US$20 billion of Canadian goods such as textiles, paint, apparel, alcohol and honey. Canada announced retaliatory duties on imports from the U.S. worth roughly the same amount, which came into effect Tuesday. The risk is that the trade war will spiral further.

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Fine Cotton Factory in Toronto. Photo by Adetona Omokanye/Bloomberg

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Many small Canadian manufacturers were shielded from earlier U.S. tariffs because of exemptions under the North American trade pact. But the latest levies imposed by President Donald Trump in August ignore that deal.

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While the US$20 billion accounts for only about five per cent of Canada’s annual goods exports to the U.S., the new tariffs appear to disproportionately affect small and medium-sized businesses. In turn, those firms account for about half of Canada’s gross domestic product. The Canadian government bolstered loans and other financial support for such firms as part of a broader $7.5 billion (US$5.4 billion) package for businesses and workers hit by the latest round of tariffs.

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Those measures won’t put out the fire, Kann said. Like many entrepreneurs whose growth potential lies beyond Canada, he’s says already exhausted domestic opportunities. Plus, some federal supports, such as funding for market research and new technology, are longer-term fixes.

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It could be too late by the time the government solutions come through, Kann said.

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Fine Cotton’s survival isn’t just important for its workers. As owner of one of Canada’s only large-scale dye houses, the manufacturer is also crucial to Jerico, an Ontario clothing maker that prides itself on a fully domestic supply chain.

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Fine Cotton owns one of Canada’s only large-scale dye houses. Photo by Adetona Omokanye/Bloomberg

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If that dye facility closes, Jerico won’t be able to dye and finish knitted fabrics at scale in Canada, said Salmaan Andani, managing director at Jerico. In Andani’s telling, manufacturers like his would be forced to source product overseas, and the country’s knitting and apparel manufacturing industry could unravel, link by link.

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Andani said the tariffs mean the company will likely to lose all of its US exports, which account for up to 10 per cent of sales. He has $22,000 worth of products ready to ship to the University of San Francisco, which ordered from Jerico because the institution wanted to support ethical, organic manufacturing, he said. It will now cost the school an extra $8,600 to receive the shipment, so the two parties agreed to put it on hold instead of cancelling.