SRTX, the Canadian textile manufacturer known for its Sheertex brand of pantyhose, is facing severe financial challenges due to impending tariffs from the United States. This situation has forced the company to lay off 40% of its workforce, approximately 140 of its 350 employees and full-time contractors. CEO Katherine Homuth made the announcement on February 5, a day after US President Donald Trump declared a temporary pause on the tariffs.
According to Homuth, the proposed tariffs would impose up to 41% duty on certain SRTX product exports to the US, leading to significant financial uncertainty for the company. "The impending US tariff changes and delays in closing the final portion of our fundraise have led to tremendous financial uncertainty," she stated. With 85% of its sales generated from the US market, the company is particularly vulnerable to changes in tariff policy.
SRTX's production facility, located in Pointe-Claire, Quebec, has reportedly seen substantial investment, totaling tens of millions of dollars aimed at bolstering its manufacturing capabilities. Despite these efforts, SRTX’s products do not meet the "Made in Canada" criteria under the US-Mexico-Canada Agreement due to the importation of raw materials. Approximately 9% of the materials used are sourced internationally, complicates the company's standing with US trade regulations.
The US government’s proposed removal of the "de minimis" exemption is especially concerning for SRTX. Currently, this exemption allows individuals to ship up to $800 worth of goods duty-free daily. If eliminated, it would subject direct-to-consumer shipments from SRTX to what Homuth describes as a "41-percent tax on these orders, combining both the new tariffs and the existing duties."
On the podcast BetaKit, Homuth expressed her awareness of the potential tariff costs which she learned about shortly before making the layoffs. She indicated the company must raise $23 million USD by the end of the first quarter to maintain operational capacity as they attempt to fulfill wholesale orders. "If you believe in the importance of making things here, now is the time to stand with manufacturers," she emphasized, underscoring the unique difficulties faced by businesses like SRTX which are deeply rooted in local production.
The company's product, marketed as the world’s most resilient tights, is made from ultrahigh-molecular-weight polyethylene (UHMWPE), also known for its use in bulletproof materials—a reflection of the innovation and investment poured on the manufacturing front. Challenges have compounded, as not only does the company face the harsh realities of international trade but also delays with necessary monetary backing. Homuth previously noted upon the tariff announcement, "This puts immense pressure on our business model, especially as a company investing heavily in integrated manufacturing here at home."
With the staggering reliance on the US market, 85% of SRTX’s exports are directed south, built through extensive collaboration and marketing efforts. Notably, performance peaks prior to the potential tariff inception have the leadership hastily moving inventory to preemptively address tariffs set to be administered post the 30-day delay.
Meanwhile, as SRTX navigates these choppy waters, it reflects broader challenges within Canada's manufacturing ecosystem as Canadian companies grapple with agility against their international counterparts. Homuth's narrative reflects not only the trials within her own company but serves as commentary on the fragile state of Canada's manufacturing sector during turbulent economic times—where sectors heavily reliant on domestic output feel the weight of shifting policies like those being threatened by the Trump administration.
Homuth’s poignant declarations resonate well with many manufacturers struggling under the looming cloud of tariffs, reflecting concerns voiced by organizations such as the Canadian Chamber of Commerce, who called for legislative action to address the pending trade discord. "Tariffs tomorrow instead of tariffs today still leave businesses, workers, and families in the lurch," said Candace Laing, CEO of the chamber, emphasizing the anticipated challenges awaiting Canadian businesses if the tariffs are executed.
With a delicate balance between sustaining operations and countering unfavorable trade policies, SRTX's leadership stands at the precipice of change. The looming US tariffs pose not just financial hurdles but also raise questions about the future of manufacturing jobs within the region. For many companies like SRTX, the recent shifts signal the need for rapidly adaptable strategies to safeguard against the tumultuous trade climate.
The call for solidarity and support echoed by Homuth could very well set the tone for how Canadian manufacturers rally against such threats of tariff impositions, highlighting the significance of keeping local production alive and thriving.