Manufacturing and material groups sounded off with concerns after President Donald Trump followed through on imposing tariffs on the United States’ biggest trading partners.
Trump signed executive orders placing 25% tariffs on goods from Canada and Mexico, and an additional 10% tariff on imports from China, with those changes due to take effect Tuesday. The White House said the actions are justified because of what it described as a need to stymie a flow of fentanyl and illegal immigration.
It has set off a dynamic trade war. Canada has already responded, with Prime Minister Justin Trudeau announcing the country would, in two phases, institute a 25% tax on a total of $155 billion worth of U.S. imports, including pulp and paper in February and steel and aluminum products in a later tranche. China’s government has also alluded to possible retaliatory measures.
News broke Monday morning of an agreement between the U.S. and Mexico to delay tariffs there by one month, with Mexico agreeing to reinforce military presence at the U.S.-Mexico border. U.S. tariffs against the European Union and U.K. could still be coming, according to Trump.
The Canadian government released an extensive list of products covered under the tariffs, including several entries for packaging. Affected fiber categories are pulp as well as corrugated and paperboard packaging such as cartons, boxes and bags. The plastic packaging listed includes bags as well as a variety of stoppers, lids and closures. Reusable bags made of materials such as plastic, cotton or jute are listed, as are flexible intermediate bulk containers.
On average for U.S. manufacturing, imports represent 13% of revenue, according to a BofA Global Research analysis Monday. More specifically, those figures are 11% for the plastics and rubber sector, 10% for fabricated metal, 9% for chemical products and 7% for paper and printing.
Tariffs are expected to drag U.S. manufacturers’ margins, which companies could offset through price increases, or, in the longer-term, by increasing domestic sourcing or re-engineering products to avoid inputs that lack domestic sources, BofA noted.
Implications for paper, plastics and metals
Canada and Mexico both are key trade partners with the U.S. for pulp and paper products. Canadian mills are a major supplier for the U.S. boxboard market, and tariffs could result in a supply imbalance in the U.S., Michael Roxland, senior paper and packaging analyst at Truist Securities, noted in a Jan. 20 memo to investors, before the tariffs were made official. He noted that tariffs likely would acutely affect solid bleached sulfate because that grade is more commonly imported than coated recycled board or coated unbleached kraft.
