US President Donald Trump's proposed tariffs on Canada could trigger an unexpected crisis in America, leading to panic-buying seen at the beginning of the coronavirus pandemic. The Trump administration's plan to almost double duties on Canadian softwood lumber could disrupt the supply chain for something nobody wants to be caught without-- toilet paper.
Trump has promised to hike duties on softwood lumber to 27 per cent as soon as April 2, with the possibility of additional levies pushing the rate to more than 50 per cent. The move could hit the availability of northern bleached softwood kraft pulp (NBSK), a material derived from wood chips that is used to make toilet paper and paper towels, according to a report by Bloomberg.
NBSK is prized for its tensile strength and constitutes about 30 per cent of standard US bathroom tissue and half of a typical paper towel.
Last year, the US imported 2 million tons of Canadian NBSK, Brian McClay, chairman of Trusted Providers of Global Pulp Market Information, told Bloomberg, highlighting the longstanding reliance of American paper-goods producers on Canadian pulp.
"Some of these mills in the United States, some of the big branded products, not only want softwood pulp from Canada, they want softwood pulp from this particular mill - they've been using it for 30 years and they will not change," McClay said.
"If Canadian pulp mills close because they don't have the fiber supply, I can't think of any other option for them - they just can't switch the recipe around," he said.
McClay warned that if import taxes on lumber exceed 50%, as they're currently on track to, "that's going to put some sawmills out of business, and that'll reduce the supply of wood chips.
"Because we don't really cut trees for making pulp in Canada, we depend on residual chips from sawmills. It would certainly boost the cost and probably reduce output," he added.
Reminder Of Pandemic Panic
The scenario risks reviving painful memories of pandemic-era toilet paper shortages, when store shelves were stripped bare amid panic buying. Another possibility of the scenario could be higher prices at the checkout counter.
Why Americans Want Canadian Lumber?
Trump has long promoted tariffs as a tool to bring manufacturing back to the US, and he's repeatedly said his country doesn't need Canadian lumber. But that stance doesn't account for the specific qualities of Canadian softwood pulp, which industry executives say can't be easily substituted with American alternatives.
According to Frederic Verreault, vice president of corporate affairs at Les Chantiers de Chibougamau Ltee, a Quebec wood processor, Americans buy Canadian products because "they are the best and the most integrated into their factories."
Sawmills are difficult to adjust, so they typically run either full tilt or not at all, Jean-Francois Samray, the head of the Quebec Forest Industry Council, explained.
"It's like pipelines, it's like power grids: It's all full, or all empty," he said.
The softwood industry operates in a "pure and perfect competition market," he said. "So in a market like that, there will be temporary closures, reduced production," which will have an "effect on continental supply and demand."
Trump Tariffs
Amid a long-running trade dispute, the US currently applies duties totaling more than 14 per cent on Canadian lumber. One of them is set to increase this year, taking the cumulative burden to almost 27 per cent, according to a US Department of Commerce proposal.
The White House's threatened 25 per cent tariffs on many Canadian goods would mean import taxes totaling about 52 per cent. And that's before the conclusion of a Trump-ordered investigation into national security concerns around lumber imports, which could mean even more tariffs.
On April 2, a US delay in applying the 25 per cent levies to goods covered under its trade deal with Canada is due to expire. The same day, Trump has pledged to unveil additional sweeping tariffs to make US trade with countries around the world "reciprocal."
Track Latest News Live on NDTV.com and get news updates from India and around the world
