As tariff tensions escalate between the United States and China, the implications for Canadian retailers are becoming increasingly complex. While Canada itself has largely been spared from the direct effects of new tariffs, the interwoven nature of global supply chains means that even indirect impacts could reshape pricing, sourcing, and consumer behaviour in profound ways.
Retail industry veteran and strategist George Minakakis, founder of Inception Retail Group, shared his concerns in an interview that delves into the potential fallout from U.S. trade policies that Donald Trump has rolled out. From inflation to supply chain disruption to the rise of artificial intelligence in retail operations, Minakakis warns that the sector may face serious headwinds in the coming months.
A Complex Global Web: Tariffs May Hit Indirectly
While Canadian retailers are not the direct target of new U.S. tariffs, many operate in North America as part of integrated supply and distribution networks that crisscross the U.S. border. That means goods manufactured in Asia and entering the U.S. before heading to Canadian shelves — or vice versa — could still be subject to increased costs.
“If I’m buying from India and sending it to the U.S., then there’s a tariff,” explained Minakakis. “You’re now looking at potentially a 30% jump in price. Is a retailer going to absorb that? I doubt they can afford to.”
For companies like Lululemon or Aritzia, which have U.S. stores and source from Asia, the issue becomes one of documentation and proof of origin. “They’re going to have to show where the product came from and there are risks if they move product from the US to Canada that already have been hit with tariffs. It’s complicated,” said Minakakis. “The paperwork will have to differentiate — otherwise they could be hit with the full tariff, even on goods ultimately meant for Canadian customers.”
Canadian Retailers with U.S. Exposure Are Vulnerable
Large Canadian retailers with significant U.S. operations — like Canada Goose, or T&T Supermarkets (a subsidiary of Loblaw) — may feel the pinch more acutely. Even if manufacturing occurs in Canada, materials like down, metals, or technical textiles often come from Asia.
“Canada Goose might manufacture here, but where do they get the down from?” Minakakis asked. “That product, if it’s sourced from overseas and ends up going through the U.S., will be taxed.”
It’s not just clothing. Store infrastructure — refrigeration units, steel and aluminum fixtures, even the cost of opening or renovating stores — may all be subject to higher costs due to material and equipment tariffs.
“If we’re not fabricating the pieces here and they come back from the U.S. after processing, we’ll see price increases,” said Minakakis. “And even if they’re fabricated here, Canadian suppliers might still raise prices to make up for lost U.S. revenue.”
Strategic Tariff Use Could Reshape Manufacturing
Minakakis believes there’s a strategy behind the apparent chaos.
“What Trump’s doing is actually very strategic. He’s trying to force manufacturing back into the U.S. by making it too painful to continue operating overseas,” he said. “If the cost of manufacturing in China plus tariffs equals the cost of doing it in the U.S., why wouldn’t you just manufacture in the U.S. and say ‘Made in USA’?”
Yet the idea that this will lead to widespread employment in manufacturing is, in Minakakis’ view, a fallacy.
“Companies are going to say, ‘Screw it — I’m going to automate this process,’” he said. “They’ll invest in machines instead of people. That’s a one-time capital investment versus ongoing labour costs.”
Automation and AI: A Response to Margin Pressure
As prices rise, and margins get squeezed, retailers are likely to turn to artificial intelligence and automation as a cost-saving measure.
“Retailers will cut costs — they have no choice,” said Minakakis. “We’re going to see AI deployed in a big way to eliminate redundancies.”
While automation may help companies protect margins, it could also accelerate job losses, potentially feeding into a broader economic slowdown.
Consumer Confidence and the Risk of Recession
The consumer — still reeling from the inflation and uncertainty of the pandemic era — may not be ready to accept higher prices without consequence.
“Ultimately, it’s the consumer that says, ‘I can’t afford this,’” said Minakakis. “And that’s where the slowdown starts. If consumers retreat and only spend on necessities, retail sales fall. That’s how recessions begin.”
He warned that the recent stock market losses of over six trillion dollars in value could rattle wealthier consumers as well.
“The luxury market is especially vulnerable. LVMH, for instance, has significant exposure through alcohol and watches,” he said. “When wealthy consumers start pulling back, that’s a sign.”
The End of Globalization as We Knew It
Minakakis believes we are witnessing a structural shift in global trade — one that has wide-reaching implications.
“Globalization, as we’ve known it, is dead,” he stated. “We’re going to see countries and businesses forming new alliances. It will take time, but sourcing, distribution, and even consumer behaviour are going to change.”
Retailers, he says, must act quickly.
“If you’re a good retailer, you’ve already diversified your supply chain. You’re not relying on one source or one country,” he said. “You might have to accept a 20% tariff instead of 34%, but you’ve got options.”
Preparing for the New Normal
The message to Canadian retailers is clear: be proactive, not reactive.
“Job one is securing your supply chain,” said Minakakis. “Keep prices normalized so you don’t lose revenue. If you have to take a hit on margins temporarily, the market will understand — especially if you’re transparent and show that you’re improving efficiency.”
He added that retailers will need to invest more in marketing to maintain customer loyalty and demand. “Consumers will be rattled. Confidence will be down. You’re going to need promotions and offers to bring them back. Tell and sell your brand story well and remember your revenue won’t grow if you’re not collecting and using data effectively.”
In terms of long-term solutions, he sees AI not just as a tool for efficiency but a necessity for survival. “Retailers are going to start saying, ‘We’re going to save a billion dollars by deploying AI and automating operations,’” he said.
An Uncertain Road Ahead
Minakakis is not optimistic about the logic behind the tariffs themselves.
“There’s no logic here,” he said. “Trump seems to believe that low tariffs caused the Great Depression, which economists have debunked repeatedly. But if we end up having to match U.S. tariffs to stay in their good graces, we could face unintended inflation here at home.”
For now, the situation remains fluid. Markets are volatile, the global economy is on edge, and retailers are caught in the middle. As Minakakis summarized, “It’s complicated. Every industry will be impacted differently, but one thing is clear — we’re not going back to the old normal. The question is how fast retailers can adapt to the new one.”
