When President Trump imposed tariffs, one of his rationalizations was the other country was going to pay for it. It was also supposed to encourage companies to bring back manufacturing back into the US. If you believe him, maybe the next story will change your mind.

In an article by Tara Deschamps of the Canadian Press, there is a company in Montreal called Gildan Activewear. If you shop at Walmart or many other stores, you might have seen the brands Hanes, American Apparel and Playtex for undershirts and undergarments. The company specializes in these garments and has factories around the world, but remarkably few in the US.

President Trump imposed the tariffs by executive order on an emergency basis and was sued. The court heard the case and decided that all tariff money collected had to be sent back to whoever paid the bills.

As many people know, the company that imports the item pays the tariff. The company has the option to increase prices to cover the tariffs, absorb the tariff and there are multiple combinations of what they can do, but they pay the tariff.

Gildan estimated they will receive $220 million back from the US Government and it is unlikely to be passed along to customers because the company did not hike the price as high as it could have (it absorbed some of the costs), when tariffs were invoked at the same time as its costs were rising.

The price of cotton, energy has gone up, so there is lot of structural inflation still in the environment.

The CEO of Gildan, Glen Chamandy said a significant portion of tariff refund will be reinvested in the business to build the company’s brands, market them and accelerate product innovation and packaging enhancements.

Linking to dividend paying stocks, if an individual won money in the lottery they have some choices – pay down debt, buy new assets, save for the future or giveaway the money. Companies do the same thing, if you were a shareholder, you hope they beside invest in the business give shareholders a one-time bonus. However, ensuring the company long term future is very important.

There are more questions than answers, till the next time – to raising questions.