Trump Tariffs Threaten Canadian Holiday Sales

Small businesses across Canada have lost out on sales because of the trade war, and many worry about their future.

For Tina Nguyen, a Canadian muralist in Belleville, Ontario, Christmas is part of another nativity story: the birth of her hair-accessory business. It all started six years ago, when Ms. Nguyen gave a cousin one of her handmade, pillowy hair scrunchies, inspiring her to sell them on the internet, where they quickly became a hit.

But this Christmas will be the end of that story. President Trump’s protectionist policies have put a significant dent in sales, said Ms. Nguyen, whose company, XXL Scrunchie & Co., relies on American shoppers for half its business.

So she will shut it down in January and instead focus on expanding her mural art portfolio. “I didn’t see it getting any better,” Ms. Nguyen, 32, said.

The holidays have provided a sobering reality check for many small-business owners in Canada hit by tariffs, a pain felt more acutely from lost sales during the busiest and most important shopping season of the year.

For Michelle Galletta, who is based in Toronto, the holiday reckoning came early. While her main products are felt embroidery craft kits, Ms. Galletta, like other small-business owners, takes advantage of the Christmas season by also selling advent calendars. She started in the summer, marketing early sales so customers could order and pay for calendars that would be shipped later.

Then, Mr. Trump announced that, as of Aug. 29, his administration would cancel a tariff exemption called “de minimis” that had voided duties on imports valued at less than $800. As a result, customers who had already bought Ms. Galletta’s calendars now had to pay an extra fee to receive their purchases.

Almost immediately, she said, many of her customers asked for refunds.

The situation looked bleak, she said, before she realized that not everything she sold to the United States, home to 80 percent of her customers, would come under Mr. Trump’s tariffs.

A free-trade agreement between Canada, the United States and Mexico, which has created an enormous duty-free market across North America, provides a carve-out for a significant number of items. Ms. Galletta’s craft kits, she happily learned from the shipping service she uses for cross-border transactions, qualified for an exemption.

“I was pretty devastated thinking that I was going to lose out on the entire U.S. market,” she said.

Ms. Nguyen also sells advent calendars to the United States. The calendars have 12 boxes for the 12 days of Christmas, each holding different hair accessories. But the accessories include claw clips that are manufactured in China and fall under the levies that Mr. Trump has imposed.

Last Christmas, the first year Ms. Nguyen offered advent calendars, she sold all of them, she said. Not this year.

“It wasn’t the sellout goal I was hoping for and that I knew we would have had without the tariffs,” Ms. Nguyen said.

Now, a new worry has emerged for Ms. Galletta and other business owners who depend on customers in the United States.

Mr. Trump is pushing to renegotiate the North American free-trade deal and has made clear that he doesn’t like the agreement, accusing Canada and Mexico of taking advantage of the United States.

Smaller businesses that so far have managed to stay afloat worry that they will be caught up in any future turmoil.

“I have to make a contingency plan for if I start losing my U.S. sales,” Ms. Galletta said.

For some small-business owners who are less reliant on American shoppers, like Daniel Stubbe, who owns Stubbe Chocolates in Toronto, the strategy to deal with Mr. Trump’s trade policy is simple: Stop selling to the United States altogether.

“We were always dinged for every order” with some kind of fee, said Mr. Stubbe, a chocolatier whose German family has been in the business for six generations. “Unfortunately, we have not been able to find a way around it.”

Mr. Stubbe has also largely stopped purchasing ingredients from the United States, and has started selling chocolates that say “Elbows Up,” a hockey term that has become a rallying cry in Canada amid the trade war with the United States.

Some smaller businesses, having lost customers in the United States, are pinning their hopes on expanding their Canadian customer base.

Marilyne Bouchard, the founder of BKIND, a Montreal-based beauty brand whose signature item is vegan nail polish, has largely been supported by customers in the French-speaking province of Quebec, but a portion of her buyers have also been in the United States.

To make up for lost U.S. sales, she is focusing on social-media marketing in English to appeal to the rest of the country. “We have a lot to do in the English part of Canada,” she said.

And then there are businesses following the path being pursued by Prime Minister Mark Carney, who wants to make a seismic shift and decouple Canada from its longtime reliance on the United States by turning to other countries.

Ms. Galletta, the embroidery-kit shop owner, is already thinking of ways to market to Europe.

“I can’t predict what’s going to happen,” she said. “The only lesson is to diversify and keep moving forward.”

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