The complete influence of
United States President Donald Trump
‘s commerce warfare, together with tariffs, reciprocal tariffs and escalating tariffs on Chinese language items, has but to be seen.
And whereas there’s at present a 90-day pause on his
reciprocal tariffs
on about 60 international locations and territories, what would possibly observe the reprieve, together with all of the financial uncertainty usually, is affecting Canadian clothes retailers that make their merchandise abroad.
Many attire firms had already shifted manufacturing from China to different Southeast Asian international locations similar to Vietnam and Cambodia as a consequence of tariffs imposed throughout Trump’s first time period.
Many individuals assume the tariffs will result in increased costs on items, however this might not be the case for some retail firms, significantly those who don’t take pleasure in as a lot model loyalty from customers, mentioned a senior analyst at
Financial institution of Montreal
who makes a speciality of retail and e-commerce.
Simeon Siegel mentioned there are methods retailers can soak up the price of tariffs on manufacturing with out essentially elevating the worth.
“Tariffs don’t give firms permission to boost costs. Customers give permission to boost costs,” he mentioned.
Siegel, who covers
Lululemon Athletica Inc.
and different attire firms similar to Nike Inc. and Birkenstock Holding PLC, mentioned retailers would possibly finally attempt to offset the upper tariff prices with increased costs, however reductions may return simply as rapidly if buyers push again.
Vancouver-based Lululemon is one in all many attire retailers that would doubtlessly be affected by Trump’s “Liberation Day” reciprocal tariffs, which included a 46 per cent tariff on Vietnam.
The corporate began transferring its manufacturing to Vietnam in 2016, together with different firms which have diversified manufacturing lately, in hopes of avoiding Trump’s beforehand imposed tariffs on China.
Final Wednesday, Southeast Asia was thrust into the identical dialog as China, Siegel mentioned.
“All these firms that spent a variety of money and time believing they have been de-risking their manufacturing, doing what they have been presupposed to be doing and transferring into international locations like Vietnam, discovered they have been going to be punished simply as harshly, if no more,” he mentioned.
These firms’ inventory costs fell the day after Trump launched his reciprocal tariff chart, with Aritzia Inc. taking the largest hit on the S&P/TSX composite index, with its shares dropping greater than 20 per cent, and Lululemon’s shares have been down practically 10 per cent on the Nasdaq,
the Canadian Press. Gildan Activewear Inc. shares have been down nearly ten per cent on the S&P/TSX composite.
Siegel mentioned he believes the uncertainty of the tariffs has been “scarier” than their precise severity since these retailers nonetheless don’t know the issue they’re making an attempt to unravel.
In a observe to shoppers,
Royal Financial institution of Canada
analyst Irene Nattel mentioned attire retailers Aritzia and
Groupe Dynamite Inc.
, each of which supply extensively in international locations on the prime of Trump’s tariff chart, have famous a number of instruments to handle tariff-related margin headwinds.
Stephen MacLeod, an analyst specializing in retail at BMO, in early March mentioned Aritzia at present sources about 35 per cent of its merchandise from China, with the objective of bringing this all the way down to 25 per cent within the fiscal 12 months 2026.
Aritzia fulfils 65 per cent of U.S. e-commerce orders from Canada, however the firm may change to 100 per cent U.S. fulfilment in 2028 to 2029 with a brand new distribution centre within the U.S., he mentioned.
Groupe Dynamite sources round 75 per cent of its merchandise from China, with roughly 50 per cent of gross sales to the U.S. shipped from Canada, MacLeod mentioned.
Attire, in contrast to different items, is essentially discretionary, so it won’t be as straightforward to go on price will increase as it might for issues folks want and will not be substitutable.
“There’s alternative ways to do all these, however the easiest way to offset a tariff is by elevating costs. That solely works for those who’re allowed to boost costs,” Spiegel mentioned.
Firms finest positioned to boost costs to offset tariffs are those who have constructed sturdy connections with their prospects. Not all firms have this luxurious. Clothes firms that don’t have sturdy branding may need a more durable time growing costs.
Such firms can both reduce prices elsewhere or bear the brunt of the strain. Their subsequent choice could be reducing the price of manufacturing, trimming fats or reducing corners — for instance, reducing the standard of the product, Spiegel mentioned.
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With occasions ever-changing, retailers now must cope with the uncertainty surrounding tariffs.
“It makes much less sense to attempt to repair the issue till they know what they should resolve for,” Siegel mentioned.
• Electronic mail: dpaglinawan@postmedia.com
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