Canada’s apparel and textile sector is bracing for potential U.S. tariffs of up to 50% after Washington pushed back the effective date of its Section 338 duties by three days, offering exporters a brief reprieve but no resolution, the Canadian Apparel Federation (CAF) said in a bulletin issued Wednesday.
The White House postponed the tariffs’ start from 12:01 a.m. ET on August 19 to August 22, calling the move a short administrative extension rather than a withdrawal. The duties would apply to a range of apparel goods representing more than $300 million in exports, according to CAF.
Negotiators remain divided over sectoral tariffs, particularly on automobiles, and Canada’s dairy supply management system, the group said. Washington has also signaled that energy issues, including the Keystone pipeline, could factor into a broader settlement.
CAF said customs clearance procedures for goods shipped to the United States remain unchanged for now, and it urged member firms able to ship and clear customs before Friday to do so in consultation with their customs brokers. Any post-deadline changes would be communicated through the U.S. Cargo Systems Messaging Service, the bulletin said.
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The federation has lobbied Canadian Industry Minister Dominic LeBlanc to prevent the tariffs from taking effect or, failing that, to secure an exemption for goods compliant with the Canada-United States-Mexico Agreement. CAF has also disputed government claims that the tariffs affect only 5% of Canadian exports, pointing to a Royal Bank of Canada analysis that found apparel and textiles among the sectors most exposed to the Section 338 measures.
A survey of more than 100 exporters conducted by CAF found a rush to accelerate U.S.-bound shipments ahead of the deadline, disrupting production schedules and diverting goods away from Canadian customers. Several firms reported their U.S. sales share had fallen by 20 to 40 percentage points amid a broader, multi-year retreat from the American market that began with the elimination of the de minimis import exemption.
Orders for spring and summer 2027 collections are already freezing regardless of whether the tariffs ultimately take effect, CAF said. Layoffs and workforce reductions are underway or planned at multiple companies, ranging from a handful of positions to significant cuts, alongside delayed investment in textile and apparel operations.
Exporters told CAF they are unable to pass tariff costs on to U.S. customers or absorb them internally, squeezing margins and freezing further investment. Some companies said they were losing established, long-term client relationships as a result of the uncertainty. Relocating production outside Canada, including shifting volume to lower-cost offshore facilities, has emerged as the dominant medium-term strategy among manufacturers, the federation said.
CAF said members seeking guidance on how the tariff action could affect their businesses should contact the federation directly. The group said it would continue pressing Ottawa for relief as talks with Washington continue this week.