When business owner Matteo Sgaramella heard about the new U.S. tariffs on Tuesday morning, he immediately started worrying about how customers south of the border would react.
One of them, a clothing retailer in Virginia, has ordered 40 custom-made jackets from Sgaramella’s Toronto-based menswear brand Outclass.
Sgaramella, who co-runs Outclass with his wife, had already purchased the fabric for the jackets and sent it to a Canadian factory, where the pieces are currently being sewn.
But now that U.S. President Donald Trump has announced 50 per cent tariffs on Canadian apparel and textiles, Sgaramella fears that his American clients won’t want to buy from him anymore because of the cost, leaving the company with loads of additional inventory it’ll be forced to absorb.
“I’m going to have to contact them and be like, ‘hey, are you okay with taking this order? This is what you might expect to have to pay in duties,’” Sgaramella told the Star, saying that he is doubtful his customers will accept the surcharge. “It’s just a burden on my expenses.”
Thousands of Canadian businesses are expecting to be hit by the new levies, which are set to come into effect at 12:01 a.m. on Aug. 19 and cover a wide range of products, such as wine, hockey sticks and cement.
The so-called section 338 tariffs will apply to select goods regardless of whether producers comply with the Canada-United States-Mexico Agreement on trade.
While economists are estimating that only about five per cent of Canada’s exports to the U.S. will be subject to these tariffs, a 50 per cent levy could cause significant damage to individual exporters that are already struggling to stay afloat amid a challenging economy.
About 15 to 20 per cent of Outclass’ e-commerce sales go to the U.S., according to Sgaramella. “I’m hoping that this is going to blow over and that it’s not actually going to happen,” he said.
Dean Wood, president of Borderworx Logistics, which helps Canadian companies distribute their products in the U.S., says that the tariff puts small businesses’ operations in jeopardy — and the federal government must act quickly.
“It is literally causing small businesses to almost fold or leave the market entirely because of their dependence on our transborder trade,” he said.
Wood said 15 of his major clients — from electronics companies to heating equipment manufacturers — have been calling him around the clock since the news broke.
Some are scrambling to move inventory into the U.S. before the tariffs take effect, while others are exploring ways to shift their supply chains out of Canada and ship directly to the U.S. from another country.
More warehouses in Canada will close, and more jobs will be lost, Wood warned, adding that 15 to 20 per cent of his clients have expressed interest in relocating to the U.S. over the past year in an effort to avoid tariffs altogether.
Wood said he has grown frustrated with the feds for moving too slowly to resolve the U.S.–Canada trade dispute, leaving thousands of small businesses in Canada to pay the price.
On Monday, Prime Minister Mark Carney issued a statement condemning the tariffs, saying that the government would work “relentlessly” to support Canadian businesses and workers during this period.
On the bright side, Sgaramella says he believes that the latest tariff news will anger many Canadians and prompt another comeback in the ‘Buy Canadian’ movement.
“I’ve been waiting 16 years for ‘Made in Canada’ to be cool,” he said. “I just hope that this reignites the flame of Canadians supporting Canadians, you know?”
