
Kevin Mason
Tariff anxiety continues and is now refocused on the latest “deadline”. Despite all the tumult and spilt ink, markets are generally ascribing a low probability to duties actually being introduced. While tariff speculation is dominating conversations between buyers and sellers… we have heard no reports of meaningful pre-buying or “insurance” purchases. This is unsurprising given various supply-chain constraints, the high cost of working capital, and the difficultly of developing new relationships in short order. Buyers want protection against tariffs, but that isn’t going to happen because the US can’t self-supply most forest products. Buyers will pay up.
For some commodities, imports (and imports from Canada specifically) are a small part of US domestic consumption, so would be easier to replace. For others (including lumber, OSB, newsprint and uncoated mechanicals), replacing imports would be slow and expensive, allowing suppliers to pass on all—or almost all—of the tariff amount to consumers. In some cases, producers straddle the border and may be able to slow/idle Canadian operations while running their US assets at full tilt. …However, if some producers expect the tariff regime to be a mere negotiating ploy, with the possibility they could be reduced/removed over the next year, drastic actions (i.e., outright closures in Canada and/or new mills in the US) would not be taken. Everyone is trying to navigate through these times, with no easy answers other than “be prepared.”