The Canadian forest products industry escaped the imposition of further tariffs during President Trump’s self-proclaimed “Liberation Day” on April 2., although the threat of future action still lingers.
While the sector (along with the rest of Canada) waited with baited breath for the US president’s declaration, there was a small measure of relief when Canada (and Mexico) were not included among the long list of countries facing new tariffs.
In late March, Canadian Prime Minister Mark Carney and President Trump discussed the trade war in a phone call, one that Carney described as productive and constructive. Carney added that the “cordial” call was the start of what will be comprehensive negotiations that will ramp up after the Canadian federal election set for April 28. Carney also announced plans to invest in a trade enabling infrastructure as part of Canada’s response to U.S. tariffs already imposed. For his part, Trump said things are going to work out well between Canada and the U.S.
However, the above supposes that Carney and his Liberal Party will win the election. Also, the leaders may have their own definitions of what “productive”, “constructive” and “things working out well” mean.
For pulp and paper producers, the worry is that any further increase in softwood lumber tariffs could stifle Canadian production leading to a decrease in fiber available to pulp mills. Using bathroom tissue as an example, much of the furnish is NBSK of which the U.S. imported about two million tonnes from Canada. The qualities this pulp imparts to the finished product cannot easily be replicated.
Overall, according to UN COMTRADE, Canada exported US$6.8 billion worth of pulp, paper and board to the U.S in 2024.
In a press release dated March 4, even the American Forest & Paper Association (AF&PS) came out against the announced 25% tariff on all Canadian goods. “New North American tariffs have the potential to seriously disrupt our industry’s complex, cross-border supply chains.” It noted that “certain raw material inputs must be sourced from Canada due to specific fiber quality demands and transportation efficiencies.”
In its release also dated March 4, the Forest Products Association of Canada said: “The U.S. President’s move to place broad-based tariffs on Canadian exports is unjustified and unilaterally breaks the terms of the existing US-Mexico-Canada Agreement.” FPAC President and CEO Derek Nighbor went on to say, “For Canada’s forest sector, if these tariffs are not removed, they will damage a long and well-functioning integrated forest products supply chain that runs two ways and benefits Americans and Canadians alike.”
Nighbor adds that creating business uncertainty on both sides of the border will drive up costs for “building materials and everyday household products for Americans”, something mentioned often by producers and politicians.
How diversified a company is in terms of its exposure to the U.S. market is important. For example, in its quarterly financial statement, B.C.-based Canfor said that although further tariffs may be imposed on Canadian forest product imports into the U.S., with its diversified operating platform in the U.S. South and Sweden, in addition to Canada, Canfor is “well positioned” to mitigate some of these costs. “However, actual and potential tariffs do present challenges for the company’s Canadian operations, and, as a result, the company is continuing its strategy of refocusing those products on domestic markets, particularly in western Canada, and strengthening its presence in offshore markets
Although April 2 was the date many were waiting for, this saga is far from over. Economists, politicians, business people among others are only beginning to calculate the effects on global trade, economies and supply chains.
Graeme Rodden has covered the pulp and paper industry for more than 40 years, including serving as editor of several well-known paper industry magazines.
