How Can Canada’s Retail Renaissance Survive the Onslaught of Trump’s Tariffs?

Last week, former Governor of the Bank of England and the Bank of Canada and newly-elected Liberal party leader Mark Carney became Canada’s new Prime Minister, after almost a decade with Justin Trudeau in the top job. With the Liberal party rising in the polls, Carney is expected to soon call a general election to seek his own mandate.

Canadians will head to the polls as the country finds itself at a pivotal economic precipice. US President Donald Trump’s escalating trade war with its closest neighbour and ally has put Canadian retail businesses on edge.

On Saturday, the 355 year-old Hudson’s Bay Company, the oldest and longest-surviving company in North America, said it may be forced to liquidate its chain of 80 stores as early as this week unless it can secure last-minute financing. The sprawling retailer, which also holds the licenses for three Canadian Saks Fifth Avenue and 13 Saks Off 5th locations, failed to pay rent on many of its locations and owes C$950 million ($660.2 million) to brands including Chanel, Ralph Lauren and Estée Lauder. More than 9,000 jobs hang in the balance.

The sudden economic turn threatens to upend several years of growth in luxury spending in Canada, fuelled by a slew of new retail openings across the country. There’s a growing risk that the supply of luxury retail may soon outweigh demand as fears of a tariff-induced recession take hold.

“There’s absolutely no doubt that the impending tariff war, which I think Trump is going to use for the next two years at least, is really freaking everybody out,” said Charles de Brabant, executive director of the Bensadoun School of Retail Management at McGill University. “People are starting to watch out and are probably a little bit more reticent to spend than they might have been.”

For Canadian retailers, this means doubling down on strategies they were already deploying in response to slowing growth: offering a broader range of price points reflecting regional preferences and creating more opportunities to connect with customers in person.

Homegrown Growth

Homegrown retailers have been leading the charge in driving Canada’s recent retail expansion.

Luxury department store Holt Renfrew recently remodelled its Toronto flagship store, complete with a new-and-improved men’s shopping destination, while Simons, a Quebec City-based retailer, has been broadening its Canadian footprint and will be taking over two former Nordstrom locations in Toronto’s Eaton Centre and Yorkdale malls. (The American retailer ceased operating in Canada in 2023.)

Property development moguls are also in growth mode. Real estate firm Carbonleo opened new luxury destination mall Royalmount in Montreal in September 2024 while luxury mall Oakridge Park is set to reopen in Vancouver in spring 2025.

The Royalmount development was created, in part, to cater to an underserved market. “Montreal only had one freestanding luxury store,” said Carbonleo’s CEO Andrew Lufty, referring to the downtown Tiffany location. This did not “make sense” considering the greater penetration of luxury stores in Toronto and Vancouver. Royalmount’s tenants include Montreal’s first stand-alone Gucci, Saint Laurent and Louis Vuitton stores.

Other retail spaces, like Toronto’s Eaton Centre, have “really taken a downturn,” despite being one of Canada’s busiest malls, said Liza Amlani, principal and co-founder of consultancy Retail Strategy Group. However, the arrival of Simons, plus the opening of a Nike flagship and Eataly eatery may help prompt a shift, she said.

Meanwhile, Holt Renfrew has been hosting more in-store experiences and adapting its brand mix to include desirable, more accessibly priced brands like Skims, Anine Bing and Fear of God Essentials which were not widely distributed in the country. To mark the launch of its new menswear floor, the retailer hosted a Louis Vuitton activation and an après-ski themed pop-up for Johnny Walker’s Ice Chalet whisky collaboration with skiwear brand Perfect Moment; it also partnered with Toronto-based retailer Better Gift Shop for an activation with a local focus.

Previously, many shoppers felt that the department store only catered to luxury customers, said Sebastian Picardo, Holt Renfrew’s CEO, but amid the tariff tensions, Holt’s wants to underscore their broader offering.

“Whether they shop or not, it doesn’t matter,” said Picardo. “What matters is that we are connecting with them. That they feel that Holt’s is for them.”

Regional Nuances

For brands looking to scale in Canada, gaining a deep understanding of the regional nuances across the nation is an essential first step. The “cardinal rule in Canada,” according to Tanya Golesic, CEO of Canadian outerwear brand Mackage, is understanding that Canadians are distinct from Americans.

Amlani pointed to Nordstrom’s three now-shuttered locations in Toronto as a result of oversaturation in the city reflecting the retailer’s lack of understanding of the Canadian market.

Canada’s three largest cities vary considerably. While Toronto is dressier, and Vancouver has a more outdoorsy side, Montreal is a bit of both, paired with European flair. But all of these cities have to deal with snow and unpredictable weather, which can make it challenging to “participate in everything that the mainstream fashion industry offers,” said Parris Gordon, co-founder of Canadian women’s fashion label Beaufille.

“Canadians want to participate … but they need the practicality in mind, they need a little convincing,” said Gordon.

Weather may explain Canadians’ pragmatism, but it also requires brands to be thoughtful about assortments and the timing of inventory shipments. Montreal-based footwear brand Maguire, for example, has seen greater investment in versatile pieces like flats that can be worn across seasons, rather than sandals or boots. Mackage has seen the most growth from a new line which focuses on transseasonal fabrics like leather and wool rather than the down coats the brand is best known for.

Physical experiences are a winning way to connect with practical Canadians, especially in turbulent times when the aspirational shopper is being squeezed. Gordon shared that whenever Beaufille has hosted physical activations, they have outperformed online sales, given Canadian’s propensity to want to see and test out items in person.

“They’re a little more discerning in terms of when they part with their money,” said Golesic. “Whether they’re a luxury customer, whether they’re an aspirational customer, you really have to connect. There has to be an emotional engagement. More so for them to believe the brand, to buy into the brand, to buy into the authenticity.”

Marketing strategy must also take a Canada-specific approach. According to Maguire co-founder Myriam Belzile-Maguire, the brand’s newsletters with a classic commercial approach perform better in Canada, where companies can only legally send communications to subscribed users. The US market, by contrast, is more receptive to editorial-style newsletters that stand out in inboxes crowded with branded communications.

Canadian Pride

Even as US tariffs and changes in political leadership leave Canadians wondering how far their dollar might go in the year to come, local players are putting on a brave face.

“Volatility always creates opportunity,” said Lufty.

Canadian brands are hoping local communities and retailers will double down on supporting them, following a surge in a “buy Canadian” movement that has emerged in the face of punishing US tariffs.

Renee Power, founder of Vancouver-based womenswear brand A Bronze Age, commends Canadian retailers’ loyalty (her brand is restocked 90 percent of the time), and hopes that amid the tariffs, “we can offer our products to maybe a new set of retailers or customers in Canada that maybe would have overlooked us for options in the States,” she said.

“If anything, it’s just a moment to be proud of where we’re from, and to lift others up, which always kind of happens in these traumatic times,” she said. A weaker Canadian dollar may also prompt retailers and consumers to look to local options.

Maguire has experienced similar support, noting Simons’ support of Canadian businesses both through a collaboration that the brand hopes will lend it nationwide visibility, and through its online shop Fabrique 1840, which spotlights local brands.

For the time being, both Maguire and A Bronze Age plan to shoulder the cost of tariffs for their US sales rather than passing them on to customers to maintain long-term American customer loyalty. A Bronze Age is using a third-party warehouse system to try to minimise costs, while Maguire is shipping inventory to its US stores on an as-needed basis.

While international luxury players have been building out their foothold in the Canadian market, Maguire and A Bronze Age, as well as womenswear brands Dynamite and Garage — both part of Groupe Dynamite, the first Canadian company to IPO since March 2023 — are examples of the opportunities for mid-range and more affordable Canadian brands.

“Canadian brands can fight back, not in the luxury space … but they can be legitimate competitors in the mid-market,” said McGill’s de Brabant, referencing the success — at home, and abroad — of companies like womenswear brand Aritzia, footwear retailer Aldo and activewear brand Lululemon.