Montreal-based The Unscented Company has severed ties with its Vermont soap manufacturer, joining a growing cohort of Canadian businesses pulling production north of the border in response to escalating tariffs. Founder Anie Rouleau said the decision was driven by a projected $150,000 cost hit by the end of 2026, a figure that forced her to accelerate a long-held ambition to domestic supply chains. “I love my manufacturer in Vermont. He was perfect, but we could not afford having an American flag on one of my products,” Rouleau said.
The move signals a structural shift in how small and medium-sized enterprises (SMEs) are navigating a trade relationship that has soured dramatically under the Trump administration. With counter-tariffs mounting and political rhetoric hardening, companies are betting that short-term pain will yield long-term resilience.
The cost of patriotism
Rouleau’s calculation is blunt: tariffs would consume margins that her business cannot spare. The Unscented Company already produces 80 per cent of its stock domestically, but key ingredients — essential oils, specialised packaging — still flow from the U.S. and further afield. Replacing those inputs with Canadian alternatives raises unit costs immediately, a burden Rouleau is willing to absorb.
“When you make that decision to produce here in Canada, you’re obviously making it more expensive for a while until you build your volume,” she said. “But I’m willing to postpone profitability to make sure we produce here and to create a solid and sustainable economy.”
That sentiment echoes across the sector. Chapman’s Ice Cream, the Ontario-based frozen treat giant, announced this week it is on track to replace more than 70 per cent of its U.S.-sourced ingredients with domestic or alternative international suppliers. Chief Operating Officer Ashley Chapman pledged no price increases for consumers until March 2028, a commitment backed by new partnerships with Canadian firms to produce components never before manufactured in the country.
A supply chain built for a different era
The speed of these pivots masks a deeper problem. Decades of free trade under NAFTA and its successor CUSMA engineered supply chains of seamless integration. Canadian firms specialised in niche segments; American counterparts did the same. The system worked — until it didn’t.
“Because of NAFTA and CUSMA, supply chains were so integrated across the three countries, we have not developed competency in certain things because that was not needed,” said Saibal Ray, chair of supply chain management at McGill University. “The competency was somewhere else.”
For SMEs, the gap is cavernous. A small body-care brand cannot simply build a fragrance house or a packaging plant. Even large enterprises struggle to replicate the depth of a continental network. Ray warns that reshoring is “much more difficult and much more expensive than people think it is,” and that the transition will unfold over years, not quarters.
The strategic imperative
Yet the strategic logic is hardening. With diplomatic relations between Ottawa and Washington at a low ebb — exacerbated by disputes over everything from dairy quotas to the renaming of geographic features — business leaders see little alternative. The federal government has expanded its own counter-tariff lists, targeting everything from steel to consumer goods, while the Bank of Canada watches inflation data for signs that trade friction is feeding price pressures.
Ray argues the current upheaval, while painful, forces a necessary evolution. “We have to develop capability over the years,” he said. “Otherwise, again, we will face this problem down the road.”
Why it Matters
The reshoring wave represents more than a defensive crouch; it is a structural rewiring of the Canadian economy. If successful, it could reduce the country’s vulnerability to external political shocks and create a deeper domestic industrial base. But the transition carries real risks: higher consumer prices, reduced competitiveness for exporters, and the possibility that duplicated capacity sits idle if relations normalise. The next two years will test whether Canadian firms can scale domestic capabilities fast enough to make economic nationalism pay.
