He explained during the speech to the National Federation of Independent Businesses,

The tariffs to get common items back into Canada are so high that they have to smuggle them in. They buy shoes, then they wear them. They scuff them up. They make them sound old or look old.

Trump was referencing a New York Post opinion article in which the Canadian author describes a personal experience obtaining cheaper shoes from the United States:

A Toronto-based designer I know purchased two pairs of shoes (retail $800 each) online from a midtown department store and shipped them to my office. The Italian contraband sat under my desk for weeks until I could entrust them to a carrier who would be crossing the border. I finally convinced my nephew who had been visiting New York to stuff them into his back-pack and rendezvous with the designer in Toronto for the drop-off. My friend saved $159.59 in combined federal and provincial taxes, and $187.26 in estimated customs charges.

New York Post – Why Canadians will never give up American products 
Slate – Trump Explains That “You Have to Take the Children Away” in Unhinged Speech to Small-Business Owners
Snopes – Did President Trump Say That Canadians Smuggle Shoes Out of the United States?