“By now, you’ve likely heard something about the collapse of our trade talks with the United States, and you’ve probably heard that we could not accept what they were proposing,” Canadian Prime Minister Mark Carney said in a media address Tuesday.
At 12:01 a.m., 15-50 percent tariffs were levied on more than $20 billion in American imports ranging from steel and aluminum to motorbikes, furniture and apparel and textiles.
“Let’s be clear: it’s a shame, because a mutually beneficial trade agreement between Canada and the United States is possible—one that respects our sovereignty, one that builds on our complementary strengths, one that lowers costs for families on both sides of the border, one that creates good jobs for our workers,” the Canadian leader added. “We worked in good faith to reach a fair deal, but since a fair deal wasn’t on the table, we made the right choice to walk away from a bad one.”
While the ink is still fresh on Canada’s retaliatory duties, Kim Glas, president and CEO of the National Council of Textile Organizations, told Sourcing Journal that “panic has set in” across the U.S. textile supply chain. “I’m hearing daily from my industry for whom Canada is a major export destination, and from some in our industry that rely on certain specialty fibers from Canada,” she said.
Many firms held out hope that a resolution would be reached through the diligent negotiations between trade officials that appeared to be taking place. The president even posted—in hindsight, prematurely—that a deal had been struck. The partners were advancing toward the finish line when the agreement in question “ended up getting blown up at the last minute” on Aug. 21. Carney vowed to take reciprocal action against the U.S., announcing a set of tariffs mirroring those imposed by the White House.
“Now reality has set in for an industry that’s already facing severe economic challenges,” Glas said, noting that she’s heard fears and frustrations from NCTO members in states like Ohio, North Carolina and Georgia over the past week. An economic wall as been erected around a core market for the U.S. textile sector that stands to constrain the free flow of goods, and she worries about what that means for the future competitiveness of an already embattled industry.
Understandably frustrating is the reality that the textile sector isn’t the true target of these tariffs; it’s just been swept up in the maelstrom. “Our industry is not being cited at all by either the U.S. or Canada as an area of focus… yet this is going to have real implications for workers on both sides of the border,” she said.
To illustrate the scope of textile trade between the two countries: U.S. imports of Canadian textile and apparel products totaled $1.5 billion last year. Meanwhile, American exports of analogous products hit a whopping $5.1 billion. “We actually have a trade balance surplus with Canada for textiles, and that surplus is about $3.5 billion,” Glas said.
Two-way textile-related trade between the U.S. and Canada equates to about $6.7 billion dollars. A 50 percent tariff on Canadian inputs for textiles and apparel will cost the U.S. industrial base about $342 million, she added.
Asked whether the impacts of the mutual duty slinging would be immediate or gradual, Glas said she believes the effects will be both swift and prolonged unless the two sides can come to an agreement.
“I think that there will be both a slowing of orders to inoculate against the tariff impact, and I think there’s also the cutting off of [in progress] orders as a result, because businesses cannot incur the expense,” she said.
Glas said orders of industrial textiles made in the U.S. like fibers for fire hoses, for example, “have immediately started to slow down,” and she suspects Canadian producers are sourcing similar, cheaper products from Asia.
The same diversion of business could also happen on the American side. “We would hate for this to stymie business and then fuel more imports coming in from China and Asia, where people are just like, ‘Hey, we don’t want to take the risk with Canada anymore; why don’t we look at other markets to service these products?’ That would be a huge loss to the U.S. textile industry as well as our Canadian and Mexican partners,” she said.
“We need a quick resolution to this, so we don’t permanently lose customers,” Glas added. The North American supply chain for textile and apparel was “built around qualified, duty-free trade,” she said, and now that the U.S.-Mexico-Canada Agreement has seemingly been “eroded” and replaced with hefty duties, all three countries will lose business from each other.
Glas believes there’s hope for a cooling of tensions as a prolonged trade war with a close ally is a decidedly unpopular political prospect.
“Members of Congress, especially on the Republican side, have raised this importance of resolving these issues with Canada because of various industries in their states. Midterm elections are always tough for the party that’s in control, and so having outstanding issues like this still unresolved can’t help from an electoral standpoint,” she said.
She pointed to lawmakers who are campaigning for reelection and actively breaking with the administration on the tariffs. Senator Susan Collins (R-Me.) has spoken out about the negative impacts of the trade spat on Maine’s agricultural and lumber industries, for example. “As more time goes on, as these tariffs go fully into effect and we start to see business decline, there’s going to be a lot of pressure on the administration to resolve this,” Glas said.
While far fewer finished apparel goods are traded between the U.S. and Canada, both markets are important respective export destinations that can’t be taken for granted, according to Beth Hughes, vice president of trade and customs policy at the American Apparel and Footwear Association.
“Canada is a critical source of tailored and wool apparel, ski jackets and other outerwear, waterproof footwear, hosiery, and select travel goods. As we approach the colder weather season, these tariffs will inevitably disrupt the success of this vital retail period for both American and Canadian businesses that rely on the production, trade, and sale of these products,” she told Sourcing Journal.
“The continuation of escalating trade tactics on both sides of the border threatens to undermine an industry that is deeply integrated across North America,” she added. The Washington, D.C.-based trade group is advocating that trade officials “return to the negotiating table immediately” to work toward restoring the relationship.
U.S. Fashion Industry Association president Julia K. Hughes said she’s surprised to see the U.S. in “a real trade war” with one of its closest allies and trading partners, and that she is hopeful that the situation will be “short-lived.”
“The tariffs are bad for consumers, bad for retailers and bad for textile and apparel businesses on both sides of the border,” she added.
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