Montréal-based textile manufacturer SRTX is cutting 40 percent of its workforce in anticipation of proposed United States (US) tariffs that CEO Katherine Homuth says would impose a 41-percent duty on some product exports to the US.
Katherine Homuth
“The impending US tariff changes and delays in closing the final portion of our fundraise have led to tremendous financial uncertainty.”
SRTX
In a Substack post on Feb. 5, the day after US president Donald Trump announced a 30-day pause on the tariffs, Homuth wrote she was placing roughly 40 percent of SRTX’s 350 employees and full-time contractors on temporary layoff for up to six months. She said the cuts would allow SRTX to continue production and sales “at forecasted levels for 2025” with a minimum of personnel.
“With 85 [percent] of our sales in the US, and tens of millions invested in our Canadian factory, the impending US tariff changes and delays in closing the final portion of our fundraise have led to tremendous financial uncertainty,” Homuth wrote.
Homuth confirmed SRTX workers were placed on a temporary layoff. If the layoff period exceeds six months in Québec, then the employer must pay severance.
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SRTX is headquartered in Montréal, with a 300,000-sq.ft. factory in the municipality of Pointe-Claire, Que. According to Homuth, the proposed 25-percent tariffs on Canadian imports would slap a 16-percent additional tax on its shipments to US retailers and a total 41-percent tax on consumer orders.
Though SRTX manufactures its products in Canada, it does not meet the “Made in Canada” requirements under the United States-Mexico-Canada Agreement because around nine percent of its raw materials are imported, Homuth said.
The US is set to eliminate the “de minimis” exemption as part of its proposed tariffs on Canadian imports. This exemption allows each person to ship up to $800 worth of goods into the US duty-free each day. Fast-fashion giants such as Temu and Shein rely on this exemption for direct-to-consumer (D2C) shipments.
For SRTX, eliminating the exemption would trigger a 41-percent tax on these D2C orders: the 16-percent duty plus the new 25-percent tariff on Canadian imports. Homuth told BetaKit that she learned about the potential cost of these tariffs on Sunday.
SRTX, which makes the Sheertex brand of pantyhose marketed as “the world’s strongest tights” using a polymer used in bulletproof fabric, recently secured $70 million CAD in convertible note financing to grow its vertically integrated manufacturing in Québec, anchored by provincial investment agency Investissement Québec.
Sheertex makes its pantyhose out of a uniquely durable polymer called ultrahigh-molecular-weight polyethylene (UHMWPE), which has been called a ballistic-grade “super material” several times stronger than steel wire.
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In addition to its rip-resistant tights, SRTX sells two B2B products: Cortex, a software-based manufacturing solution, and Watertex, a patent-pending water-repellent fabric.
The layoffs come as the SRTX founder has been vocal on social media about her fundraising journey, sharing its hurdles and soliciting community feedback. Homuth has said that the company must raise $23 million USD in equity by the end of Q1 to finance its operations as it works towards fulfilling wholesale orders before it receives payment for them later this year.
Homuth told BetaKit that SRTX was looking to close the remaining financing by the end of February, but that the US tariff announcement “uprooted that plan” as the company is now rushing to send product to the US and bring in US yarns within the tariff-free 30-day window. SRTX would then only need to worry about the 25-percent tariff rather than the 16-percent duty should they be imposed, Homuth said.
Eighty-five percent of SRTX’s export market is in the US, which the company was able to achieve through tens of millions of dollars in marketing and collaboration with US retail partners, Homuth said. Pivoting its focus to Europe would be impossible without more funding, she added.
Homuth said on The BetaKit Podcast ahead of Trump’s official tariff announcement that Canadian startups should “have a plan A through D,” adding that the “uncertainty” presents the biggest challenge.
Feature image courtesy SRTX.