US-Canada Trade War Fragmenting North American Fashion Market

The Canada-US trade war is creating a less integrated North American fashion market, forcing brands to rethink supply chains and inventory strategies.

Economic tensions between the U.S. and Canada escalated rapidly in recent weeks, moving from cautious confidence to a full-scale trade war. The U.S. enacted a 50% tariff on nearly $30 billion worth of Canadian goods, targeting a wide array of exports including clothing and apparel. Canada responded with counter-tariffs, promising to match U.S. duties “dollar for dollar.”

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This escalation is hitting the fashion industry hard. The U.S. exports around $4.6 billion worth of clothing to Canada, while Canada exports approximately $2.8 billion worth of apparel to the U.S. Canadian manufacturers, known for producing items like outerwear and men’s formalwear, face steep costs. Even brands that manufacture outside Canada are affected, as the tariffs apply to all goods shipping from the country regardless of where they were made.

Attorney Kirk Sigmon, who advises dozens of brands on international trade, noted that the impact is already visible. He reported that numerous Canadian companies he works with have had to radically change their approaches. One Canadian custom clothing manufacturer is actively exploring whether they can set up shop in the United States to avoid the tariffs, which have “basically killed interest from their U.S. customer base.”

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Brands pivot operations to avoid costs

Some companies have already begun moving operations across the border to mitigate the financial hit. Ssense, a major Canadian retailer, started transitioning operations into the U.S. earlier this year. The U.S. is a vital market for the retailer, and losing or limiting access to American customers poses a significant risk. The Canadian denim brand Duer has followed a similar path, moving fulfillment and operations to the U.S. to avoid further tariffs, as more than half of its revenue comes from American customers.

Industry experts foresee a lasting shift in how North American fashion operates. Rohit Tripathi, vice president of industry at supply chain management company Relex, explained that companies have historically treated the U.S. and Canada as one commercial region with shared inventory and centralized distribution. He predicted that brands will increasingly plan the two countries separately, carrying distinct assortments and inventory pools rather than moving merchandise freely across the border. This reduces flexibility and increases markdown risk when demand differs from forecasts.