Geopolitical Risks and Ethical Concerns Push Canadian Companies to Rethink Chinese Manufacturing

Toronto, Canada - Leading Canadian brands such as Aritzia, Lululemon, and Canadian Tire are making strategic moves to reduce their reliance on Chinese manufacturing, citing mounting geopolitical tensions, trade uncertainties, and ethical concerns. The shift is accelerating as the spectre of U.S. tariffs on Chinese imports looms, with former U.S. President Donald Trump reigniting fears of increased duties should he return to the office.

According to a report published in Daily US Times on January 20, 2025, the transition away from China began during Trump’s first term with his tariff-heavy trade policies, continued under President Joe Biden, and has gained further traction as businesses prepare for potential economic disruptions.

A Growing Trend of Supply Chain Diversification

Canadian companies are taking proactive measures to mitigate risks associated with Chinese manufacturing. Groupe Dynamite, a Montreal-based clothing retailer with a growing footprint in the U.S., has already begun relocating production. CEO Andrew Lutfy confirmed that the company is actively reducing its dependence on China to shield itself from future trade disruptions.

Shoe manufacturing giant Steve Madden is also making significant changes, planning to cut production in China by 40%—a substantial increase from the previously targeted 10%. Canadian Tire’s CEO, Greg Hicks, has also acknowledged a “sizeable shift” in the company’s sourcing strategy, reducing its exposure to potential geopolitical risks and supply chain vulnerabilities.

The Role of Ethical Concerns

Beyond financial and logistical considerations, ethical issues have further driven the move away from China. The widespread allegations of forced labour involving Uyghur Muslims in China’s Xinjiang region have prompted increased scrutiny of supply chains. The enforcement of the U.S. Uyghur Forced Labour Protection Act has added additional compliance pressures, requiring companies to prove their products are ethically sourced and free from forced labour.

Carlo Dade, trade director at the Canada West Foundation, noted that the convergence of ethical concerns and geopolitical instability has compelled Canadian firms to take decisive action. Brands such as Aritzia have been diversifying their manufacturing base since their public listing in 2016, with the majority of their production now taking place outside China. Similarly, Lululemon has reduced its dependency on Chinese suppliers to just 3% of its total sourcing.

Despite the ongoing transition, completely disengaging from Chinese manufacturing remains a formidable challenge. China’s industrial ecosystem offers unparalleled advantages, providing not just cost-effective labour but also a comprehensive supply chain infrastructure that includes critical garment components such as zippers, linings, and textiles.

For many businesses, replacing this integrated ecosystem with suppliers in Southeast Asia, Latin America, or even domestically poses logistical and financial hurdles. Additionally, the extensive experience and efficiencies built within Chinese manufacturing hubs are difficult to replicate elsewhere in the short term.

The Broader Impact on China and Global Supply Chains

As Canadian firms and other global players continue their strategic shift away from China, the Chinese manufacturing sector could face significant downturns. A decline in foreign investment and production contracts could challenge China’s manufacturing dominance, forcing it to seek new markets and redefine its economic priorities.

For Canadian businesses, diversifying supply chains is not just about mitigating risks but also about ensuring long-term sustainability and compliance with ethical sourcing standards. The ongoing transition reflects a broader global realignment of trade relationships, where geopolitical realities are increasingly shaping business decisions.