Trump Administration Imposes Tariff On Canada’s Plastic, Supply Chain Disruption May Be Limited

The United States has imposed a new 50% tariff on plastic products from Canada, but relying on strong domestic production capacity and a trade surplus, the impact of this tariff may be relatively limited.

The USMCA review presents an opportunity to deepen North American plastics trade, with the United States currently maintaining a $1.55 billion trade surplus with Canada in plastics.

The Trump administration has decided to impose an additional 50% tariff on certain Canadian plastics and plastic products. A comprehensive economic analysis indicates that, thanks to its strong domestic production capacity and substantial trade surplus with Canada, the United States is expected to mitigate potential supply chain disruptions. The new tariffs, introduced under Section 338 and targeting billions of dollars’ worth of Canadian plastic imports, are a strategic move by Washington in response to Canada’s automotive trade policies. Meanwhile, the United States-Mexico-Canada Agreement (USMCA) is undergoing review, creating an opportunity to further strengthen North American plastics trade cooperation.

According to customs statistical value, U.S. imports from Canada of plastics covered by the current tariff amounted to approximately USD 2.99 billion in 2023, USD 3.09 billion in 2024, and USD 3.10 billion in 2025. Based on free alongside ship (FAS) value, U.S. exports to Canada of the same category of plastic products reached USD 4.65 billion in 2025, generating a trade surplus of USD 1.55 billion and fully demonstrating the strong manufacturing strength of the United States in the relevant categories.

Dr. Perc Pineda, Chief Economist of the Plastics Industry Association, released this economic analysis report, assessing the scope of tariff coverage, the potential impact on U.S. plastics producers and supply chains, and the strategic opportunities the review of the USMCA presents for the industry.

"The new tariffs introduced under Article 338 are targeted measures against Canada's automotive trade policies," said Perc Pineda. "For the taxable plastics category, the U.S. has sufficient domestic capacity and maintains a trade surplus with Canada, so the risk of large-scale supply chain disruptions is relatively limited. Meanwhile, the ongoing review of the USMCA is expected to resolve existing trade imbalances and strengthen the competitive advantage of the North American integrated plastic supply chain."

Tariff Coverage Scope and Trade Impact Analysis

Although the relevant products are listed in the notice’s annex using 8-digit Harmonized Tariff Schedule (HTS) codes, Perc Pineda explained that the product descriptions are for reference only and will not limit the scope of application of the Section 338 tariff measures. Any 6-digit or 8-digit Harmonized Tariff codes listed in the notice include all goods classified under their corresponding 10-digit subheading codes, so the actual scope of impact is broader than the initial product descriptions suggest.

Industry insiders worry that the stacking of multiple tariffs—a new 50% tariff on imports from Canada, tariffs on imports from certain countries, Section 301 tariffs addressing forced labor concerns, and Section 232 tariffs—will sharply drive up production costs. However, Perc Pineda noted that goods compliant with USMCA rules, as well as all goods subject to applicable Section 232 tariffs, are not subject to the new Section 301 tariffs related to forced labor.

“The extent of price fluctuations depends on whether producers can adjust their procurement channels, absorb rising raw material costs, and find alternative sources of supply,” said Perc Pineda. “While the imposition of additional tariffs will certainly create cost pressures, export data clearly show that the United States is a major producer of such plastic products.”

Trade data supports the above judgment. In 2024, U.S. exports of the tariff-affected plastics to Canada amounted to $4.74 billion, compared with $4.75 billion in 2023. Looking at the global market, U.S. exports of such plastic products reached $16.3 billion in 2025 on an FAS basis, underscoring the industry’s competitiveness in the international market.

Perc Pineda said: "Taken together, the data show that the U.S. has ample domestic production capacity, while also being able to source imports from other trading partners as a supplement."

Optimize North American Plastic Trade Based on the US-Mexico-Canada Agreement

Even with the USMCA in place, there is still room for optimization in the bilateral plastic trade between the US and Canada. Perc Pineda stated that the scale of plastic imports from Canada to the US remains higher than the export scale. The modernized and revised USMCA is expected to further expand trade development opportunities.

“Plastic industries in Mexico, the United States, and Canada have all benefited from the closely integrated manufacturing supply chains established under the agreement, with capital goods and intermediate products highly dependent on plastic products,” he noted. “Ensuring market access to keep the supply chain running smoothly is crucial.”

The agreement is currently under review and can be improved through several adjustments: updating the rules of origin to better protect the interests of the agreement’s member countries and guard against the impact of products from non-member countries; and expanding the scope of the agreement to include Canada’s agricultural sector, which is highly dependent on plastic packaging and related products. These adjustments would help promote a more balanced trade relationship and enable North American manufacturing companies to gain an advantage in global competition.

Plastic trade reflects the differentiated development pattern across North America.

Data from the past three years shows that under the framework of the US-Mexico-Canada Agreement (USMCA), the plastic trade between the United States and its two North American trade partners has exhibited divergence, reflecting the differentiated characteristics of the supply chain in the US plastic industry. Perc Pineda noted that imports of plastic machinery can supplement domestic production, helping manufacturing companies acquire specialized equipment and maintain competitiveness. US mold companies have the potential to expand domestic mold production capacity, which is expected to reduce reliance on imported molds.

“The U.S. maintains a trade surplus with Mexico in plastics, but a deficit with Canada, reflecting differences between the two major trading partners in industrial strength, production structures, and market demand,” Perc Pineda summarized.

The starkly different trade patterns between the United States and Mexico, Canada highlight the complexity of the integration of North America’s plastics manufacturing industry. Mexico is increasingly becoming an important market for U.S. plastic exports, while U.S.-Canada trade relies more on Canadian import supply. This resulting trade imbalance is precisely the issue that the new tariff measures and the review of the USMCA aim to address.

Strategic Choices Facing Manufacturing Enterprises

The analysis report suggests that with the implementation of new tariffs and the ongoing negotiations of the US-Mexico-Canada Agreement, American plastic manufacturing companies will enter an adjustment period. Enterprises that heavily rely on imports from Canada need to evaluate alternative procurement options, including expanding domestic sourcing and diversifying import channels. However, export data indicates that the United States has sufficient domestic capacity, which means that many companies have feasible options for restructuring their supply chains.

The new tariff regulations also create opportunities for U.S. domestic manufacturers, who are expected to capture market share previously held by Canadian suppliers, especially in product categories where domestic firms already have production capacity and have long faced price competition from imported goods. Changes in the market landscape may drive growth in manufacturing employment and capital investment in the U.S. plastics production sector.

As the review of the US-Mexico-Canada Agreement (USMCA) continues, industry stakeholders will closely monitor the various provisions, hoping that the new regulations will further enhance the competitiveness of the North American industry while ensuring fair trade among the three member countries. The results of this round of negotiations, combined with the impacts of new tariffs, will shape the development landscape of the North American plastic manufacturing industry in the coming years.