Fine Cotton Factory says U.S. tariffs and lingering uncertainty have prompted the Toronto textile maker to expand into the United States as early as next year.
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Fine Cotton Factory Inc., a Canadian textile manufacturer, says it is preparing to expand into the United States after tariffs disrupted its cross-border sales.
The company produces fabrics for clothing, mattresses and bedding at its Toronto mill, and about half of its sales are tied to U.S. customers. Skip Kann, executive vice-president of sales and marketing, said U.S. tariffs of up to 50 per cent on some products caused American buyers to delay orders and reduce inventories, leading to a drop in sales.
Kann said orders are starting to recover, but the company is already adjusting operations to reduce exposure as it prepares a longer-term American expansion.
The company has begun shipping unfinished fabrics to U.S. contractors for additional processing, which Kann said can lessen tariff exposure on finished products while it lays groundwork for production.
Kann said the tariff experience has damaged the relationship between the two countries and that Fine Cotton Factory intends to put some of its business in the U.S. “as a long-term plan so that this can never happen to our company again.” He added that he plans to open a U.S. warehouse before sourcing equipment and beginning production early next year.
Even if tariffs are removed or a new trade agreement is reached, Kann said concerns about supply-chain trust could still influence customer decisions, adding, “There could always be that niggling little doubt from customers that don’t fully trust the supply chain out of Canada.”
Economist Pau Pujolás of McMaster University said the broader risk is that a loss of trust in cross-border supply chains can affect investment decisions for years. He said, “Just the fear is enough to generate those suboptimal decisions,” and described the “real harm” as decision-makers planning for potential trade disruption.
Pujolás said that even with a new free trade agreement, businesses may continue to worry about future U.S. trade barriers, noting, “The worst thing that you can do to a bunch of business decision-makers is to tell them policies may or may not change.”
Another professor, Ari Van Assche of HEC Montréal, said some manufacturers initially put expansion plans on hold after U.S. tariffs took effect in March 2025, but that some now feel they “cannot hold off for too long anymore.” He said he knows of another Canadian manufacturer considering a new U.S. plant, while a shortage of skilled workers complicates plans.
Van Assche also said the broader picture has not yet shown a major shift of Canadian manufacturing investment into the United States, pointing to Statistics Canada figures showing Canadian direct investment in the United States was down slightly at the end of 2025. He warned that the slowdown could change if more firms respond to continued uncertainty.
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