SRTX has temporarily laid off 40 per cent of its workforce, attributing the move to the looming threat of tariffs from the U.S. and delays in closing its latest fundraise.

The Montreal-based materials manufacturer would be hit with 41 per cent tariffs for its U.S. shipments, founder and CEO Katherine Homuth wrote in a LinkedIn post Wednesday. “We are in a worst case scenario,” she added. The company had around 350 employees prior to the layoffs, according to Homuth.

SRTX expected a 25 per cent cost increase on shipments to other businesses, Homuth wrote, but had not expected it to be on top of the 16 per cent duty already charged on some products. This existing tariff, Homuth explained, was imposed because some of the company’s raw materials are sourced from South Korea.

The double-whammy, totalling 41% tariffs on all U.S. shipments, would apply because of a threat by President Donald Trump to remove the de minimis exemption. This rule meant SRTX didn’t pay the 16 per cent tariff on goods under US$800 shipped directly to U.S. consumers. If tariffs are imposed, that would no longer be the case.

The 30-day pause on tariffs has given the company time to shift more inventory over to the U.S., and Homuth said she hopes the layoffs will help the company “extend runway.” SRTX is “expediting efforts” to source raw materials from the U.S. to lessen its exposure to tariffs, Homuth said. But the custom fibres will probably take “months to procure,” she added.

In December, Homuth was candid about SRTX’s fundraising struggles. The company has raised US$150 million in equity, US$50 million in convertible debt, and US$50 million in other debt to date, according to Homuth. But it’s losing $30 million annually on its tights business and is “not even close” to being profitable yet, Homuth has previously said.

“What we need is a big injection of capital. Someone with a lot of willingness to take a moonshot,” she said in an interview with The Logic in December. The company is still looking to speed up the close of its fundraise, Homuth said when announcing the layoffs. The tariffs added uncertainty to the equation, and it caused “some investors to ask more questions and pause,” Homuth said. 

But, Homuth said, the company’s vision and strategy remain the same: to build “all the world’s clothes out of Canada,” and become a multi-hundred-billion-dollar company.

Editor’s Note: This story has been updated with further comment from Katherine Homuth.