As the January inauguration approaches – and with it the prospect of hefty tariffs on Mexico and Canada – market participants and industry analysts said any potential effects on recycled paper and containerboard markets would largely be indirect.
On Nov. 25, President-elect Donald Trump threatened hefty tariffs on Canada, Mexico and China, to take effect from Jan. 20, his first day in office.
Producers of consumer goods, and major exporters and importers in China “were prepared for this situation even before the election,” said Hannah Zhao, director of fiber at commodity pricing and analysis agency Fastmarkets RISI. “But after the election, of course, they took action right away.”
Even before the threatened increase in tariffs, major exporters in China and Southeast Asia started producing faster to ship products to the U.S. ahead of Trump’s inauguration, she said. As in many packaging sectors, the fourth quarter of each year is traditionally weak, but this year orders for paper packaging, such as containerboard and boxboard, suddenly increased to “preload” the price to the U.S., increasing demand for recycled fiber.
Likewise, James Derrico, vice president of new business at CellMark, a large brokerage for recycled materials including recycled fiber, said his firm saw an immediate effect after the election. “Ocean freights jumped up pretty dramatically on importing material to the U.S. that looked like it could potentially be hurt with tariffs.”
Although the likelihood of implementation of a 60% tariff on Chinese shipments to the U.S. is far from clear, Chinese demand for paper packaging would probably cool down, despite the increase in the lead-up to Trump’s inauguration, Zhao said. “It takes some time for them to adjust to this very high tariff situation,” she said, adding that Chinese demand for recycled fiber was sure to fall significantly.
In the wake of China’s 2018 implementation of a ban on imports of scrap material, a policy known as National Sword, India and Southeast Asia have become prime destinations for U.S. recovered paper. These countries pulp the recovered paper and then send it to China for packaging manufacture.
India, Malaysia, Thailand and Vietnam combined to receive nearly 40% of U.S. recovered fiber exports in January-October 2024, according to U.S. International Trade Commission data. Mexico accounted for about 15% and China received just under 10% of the total. Canada received only 5%.
So if Chinese demand for recycled fiber were to fall, so too would Asian demand for U.S. exports, and “that definitely will impact the U.S. recovered paper market,” Zhao said.
In addition, tariffs on certain developing nations – so-called BRICS countries such as India and Brazil – should they support an alternative currency to the U.S. dollar, would likely mean a slowdown in goods imported to the U.S. and further weaken demand for paper packaging, she said.
Likewise, Mexican manufacturing of consumer goods relies on U.S. demand, said Derek Mahlburg, economist and director of North American paper and packaging at Fastmarkets RISI. “Their demand for importing containerboard from the U.S. is just going to go down, period,” he said. “And this is regardless of whether we were to see any kind of retaliatory tariffs.”
In general, weak manufacturing of consumer goods leads to decreased demand for packaging, he said, pointing to the drop in OCC prices in 2019 following increased trade restrictions during Trump’s first term.
“China is a huge driver of what happens to U.S. prices,” Mahlburg said. “There’s only so much decoupling that can happen really because of how much U.S. recycled fiber does get exported.”
However, he said, “there might be some winners and losers, but overall, tariffs are generally not good at stimulating economies.” Tariffs on Mexico and Canada could create “winners within the U.S.,” he said, referring to packaging manufacturers.
In addition, the U.S. produces most of its own food, including processed foods, which is among the most important users of corrugated cardboard, he said. “So some of these sort of offshore headwinds to demand could conceivably get offset by domestic demand, and so more OCC demand from domestic mills, potentially, as long as … the overall impact to the U.S. economy isn’t strong enough.” However, he said the downward impact on OCC demand and pricing likely would offset any of the domestic positives.
Effect on price increase nominations
Heading into 2025, several paper packaging producers announced price increase nominations. However, Mahlburg said tariff implementation was unlikely to have an effect on buyers accepting the increases. “The U.S. does import a fair amount of containerboard from Canada, but it exports essentially the same amount back to Canada,” he said. “This means that the tariffs do not really represent a threat to overall supply. If imports of containerboard from Canada, Mexico or China played an important role in supplying the U.S. market, there would be a clear path to tariff risks affecting the price increase.”
Similarly, in their quarterly North America containerboard update released in December, analysts at RaboResearch projected an 11.4% annual price increase through September 2026, “driven by a combination of industry performance as well as inflation expectations.” The report from the research arm of the Dutch financial services company RaboBank said 42-pound unbleached kraftliner is expected to reach $1,100 per metric ton, and recycled liner prices are projected to follow closely behind, adding that the forecast closely aligned with the recent price increase announcements of $60-$80 per metric ton for various grades of containerboard.
In addition, the report authors wrote, “containerboard producers continue to grow their pricing power as they consolidate and the industry becomes more vertically integrated.”
Pricing for contracted volumes of recycled materials wouldn’t be immediately affected, Derrico said, though profit margins through the remainder of the contract term could decrease. Costs relating to additional red tape required for both importing and exporting, including possibly more staffing, would add to the margin pressure.
Derrico remained optimistic that Canada and Mexico would not resort to retaliatory tariffs, because the customers overseas still need materials. With tariffs, “it’s not like you’re going to increase your recycling rates, or it’s not like you’re going to create more recycling jobs.”
As Chris Goger, senior director of recycling at recycled materials broker Blackbridge Investments, put it: “Who knows how it’ll actually take shape? And so it’s kind of hard to make sense of it, but at the same time, you can’t just say, oh, we’ll worry about it if and when it happens.”
Similarly, Derrico said, “It does make it hard to plan for things in these markets where you have no idea the variable of what Trump is actually doing or if he’s saying what is actually true to some degree, but it does seem like he is pretty dead-set on tariffs. We are anticipating that those will come, and obviously we don’t want them to affect us, but our fingers are crossed that they will be very minor affecting the recycling industry as a whole.”
