A Canadian textile maker battered by U.S. tariffs is looking to expand south of the border, illustrating how the trade war could leave a lasting mark on the country’s manufacturing sector.
Fine Cotton Factory Inc. produces fabrics for clothing, mattresses and bedding at its Toronto mill, with roughly half of its sales tied to U.S. customers.
The company saw those sales tumble as tariffs of up to 50 per cent on some products prompted American buyers to delay orders and run down inventories, said Skip Kann, executive vice-president of sales and marketing at Fine Cotton Factory.
Orders are now starting to recover, but he said uncertainty over the Canada-U.S. trade relationship has the company already moving some production to the United States.
Kann said Fine Cotton Factory is shipping some unfinished fabrics to U.S. contractors for additional processing, reducing its exposure to tariffs on finished products, as it lays the groundwork for a larger American expansion.
“There’s been damage done to the relationship between the U.S. and Canada,” he said in an interview.
“We are going to put some form of our business in the U.S. as a long-term plan so that this can never happen to our company again.”
Kann said he plans to open a U.S. warehouse before sourcing equipment and beginning production early next year.
Even the removal of tariffs or a new Canada-U.S. trade agreement may not alter those expansion plans, he said.
“There could always be that niggling little doubt from customers that don’t fully trust the supply chain out of Canada,” Kann said.
That erosion of confidence could have consequences beyond individual companies, said Pau Pujolás, associate professor of economics at McMaster University.
He said the loss of trust in cross-border supply chains could potentially influence where manufacturers invest for years to come.
“Just the fear is enough to generate those suboptimal decisions,” said Pujolás, who specializes in international trade.
“The fact that they are scared, the fact they are thinking of this possibility of a trade disruption when they are taking these investment decisions, that’s the real harm.”
Even if a new free trade agreement is reached, he said businesses may continue to worry that a future U.S. administration could impose new trade barriers.
“The worst thing that you can do to a bunch of business decision-makers is to tell them policies may or may not change,” Pujolás said.
When U.S. tariffs on Canadian goods took effect in March 2025, some manufacturers put expansion plans on hold and adjusted supply chains to limit their exposure.
But as the trade war drags on, some companies are reaching a point where they can no longer delay decisions about where to invest, said Ari Van Assche, a professor of international business at HEC Montréal.
He said he knows of another Canadian manufacturer that is now seriously considering a new U.S. plant after facing steep tariffs, although a shortage of skilled workers is complicating plans.
Still, Van Assche said the broader economic picture does not yet point to a major shift of Canadian manufacturing investment south of the border.
“In the aggregate data, we don’t see a lot of ... companies moving away,” he said. “There’s no uptick in foreign investment in the manufacturing sector in the United States coming from Canada.”
Statistics Canada figures show Canadian direct investment in the United States was down slightly at the end of 2025.
But Van Assche warned that could change.
“It might well be that other companies, even if they’re not facing this, are saying, ‘Look, we cannot hold off for too long anymore.’”
This report by The Canadian Press was first published Nov. 11, 2026.
Brett Bundale, The Canadian Press
