Dynamite, Canadian Tire and lululemon relocate their production out of China

The tariffs that US President Donald Trump is threatening to impose on products made in China are prompting Canadian retailers such as Dynamite, Canadian Tire and Lululemon to reduce the quantity of goods manufactured on Chinese soil.

The threat of customs tariffs made by the president-elect at the end of November against products coming from Canada and Mexico has caused a lot of ink to flow and placed the federal government and the provinces on alert.

Canada, which says it is ready for a trade war with the United States, has a first response of $37 billion in its plans if President Trump goes ahead with his threats.

But the threat from the American president — who was sworn in this Monday — also targets China, which could penalize Canadian retailers who manufacture products there that they then sell on the American market.

This is the case of the Montreal clothing manufacturer Groupe Dynamite, based in Montreal, but also of the Vancouver companies Aritzia and Lululemon, and the Toronto chain Canadian Tire.

Each of these companies was recently asked how they planned to protect themselves against these possible tariffs when presenting their financial results to investors.

In a recent call with investors, Groupe Dynamite President and CEO Andrew Lutfy said it has already taken steps to move more production outside of China. Mr. Lutfy, however, refused to say to what extent this relocation was taking place.

Groupe Dynamite began its expansion into the American market in 2007; To date, it has 109 Garage stores and five Dynamite stores south of the border, according to its most recent investor presentation.

Not a new trend

The trend of companies moving production out of China is not new.

Tensions between the United States and China have been escalating for years, and the customs tariffs that the Republican president imposed during his first term were maintained by his successor, Democrat Joe Biden.

But this trend toward offshoring has recently accelerated. New York shoe manufacturer Steve Madden, for example, plans to reduce its production in China by 40%, having previously set a target of 10% reduction.

Like Washington, Ottawa had also hit Chinese imports with punitive tariffs, more specifically electric cars, steel and aluminum.

And in light of growing geopolitical tensions, Canadian companies have undertaken to review their trade relations with China.

Canada’s business community is receiving signals that there is a risk in having a significant part of its supply chain in Chinaexplained lawyer specializing in commercial law John Boscariol, partner at the firm McCarthy Tétrault.

Forced labor

Another factor may have encouraged companies to relocate their production outside China: allegations surrounding forced labor imposed, particularly on the Uyghur minority in the province of Xinjiang.

The entry into force in the United States of the Uyghur Forced Labor Prevention Act (UFLPA) means that companies risk seeing some of their exports blocked at the border, which would subsequently force them to to prove that these products are not the result of forced labor.

Last December, the head of Canadian diplomacy, Mélanie Joly, announced the imposition of sanctions on Chinese officials and Russian nationals who, according to Ottawa, committed human rights violations.

According to a text by CBC’s Paula Duhatschek

With information from CBC