Pallets and protectionism: how trade barriers change pallet selection and management optimization. Will higher pallet prices encourage the growth of pallet reuse systems? Leave your comment below.
Trade policy has again taken center stage in the pallet world—and not in a good way.
On February 1, President Trump announced a 25% tariff on imports from Canada and Mexico, including softwood lumber, set to take effect on April 2. This comes on top of an existing 14.5% duty on Canadian softwood, pushing the effective tariff rate to nearly 40%. Considering that roughly a quarter of U.S. consumption is imported from Canada, there will be an effect.
The implications for pallet manufacturers and their customers are immediate. Lumber prices are almost certain to rise. While COVID-era spikes were driven by unique supply and demand shocks, this is a policy-driven price shock that hits the core input of pallet manufacturing.
Short term: Expect lumber prices to rise. That means pallet prices will also rise. Higher pallet prices will trickle down the supply chain. As the NAHB warns, tariffs will raise construction costs and reduce housing affordability—but the effects won’t stop there. As consumer demand softens in response to higher prices, product movement will slow, and with it, pallet demand. Pallets remain a classic derived demand product: when goods don’t move, pallet demand falls.
Long-term: Whether you believe current tariffs are just another tactical Trump political cattle prod or part of a legitimate longer worldview, things should change. Tariffs are either here to stay, or at minimum, a continued threat to be used at political whim, evocative of one of those horror movie bad guys who you just can’t seem to kill.
Either way, the market landscape has transformed – perhaps irrevocably. With that in mind, a different story may emerge. With wood contributing as much as 80% of the cost of a wood pallet, prolonged high wood prices will soften customer resistance to reuse systems – which can be particularly helpful in lowering pallet cost per use.
In the long term, there may be opportunities within the disruption.
Pallets and Protectionism: What’s Next?
Protectionist policies have a way of nudging supply chains to shorten their reach. Nearshoring and regionalization have already done that to a degree in recent years – not just for political reasons, but for resilience and supply chain risk mitigation. But that was before the jarring implementation of U.S. tariffs. In that context, reusable pallet systems should find new friends.
With fewer cross-border complications, reusable pallets are easier to manage in closed or semi-closed loops. That’s good news for well-established pooling systems like CHEP, PECO, and iGPS, which already have infrastructure in place. More regional production could boost loop density and reduce retrieval costs.
And there’s precedent. Before NAFTA, the Canadian Pallet Council coordinated a robust national reuse pool with over 7 million pallets in circulation. But as trade liberalized, cross-border flows took precedence, and U.S.-based systems dominated. The CPC became less relevant and was eventually wound down in 2015.
And there were similar stories in the U.S. where local plant pallet pools became ineffective as production facilities began to specialize within the U.S. and internationally to serve all markets with a more narrow range of SKUs versus one plant serving all of the products to a particular market area.
The recent policy turn may revive interest in targeted domestic reuse strategies. Rising material costs make the case for reusable pallet durability and lifecycle savings, particularly in industries where product flow is consistent and predictable. And even if the tariffs prove to be shortlived, a switch to reusable pallets reduces the need for raw materials and provides greater security against the potential threat of future tariffs or other supply disruption.
Reusable pallet systems may gain traction in sectors not adequately served by the dominant pools—those using a critical mass of non 48×40-inch pallet sizes, requiring specialized handling, or operating in tight closed loops. And as tier-manufacturer suppliers relocate domestically, additional opportunities will emerge.
Make no bones, tariffs will hurt in the short term and quite possibly, beyond. But they might also force a rethink in how we move goods. And in that rethink, a gradual shift to reusability, and smarter digitally enabled pooling, particularly in areas of easy adoption, just might be the way forward.
Please feel free to leave comments below.
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Rick LeBlanc, EMBA, is the founder and editor of Reusable Packaging News (subscribe to the free newsletter) and editor of Western Pallet Magazine. A supply chain journalist with more than 30 years of experience, he specializes in pallets, reusable packaging, material handling and related operations. Rick is co-author of Pallets: A North American Perspective and Pallets & Progress: A Collected History of Pallets and Palletized Handling 1922–1945. He is also an advisory board member of the Virginia Tech Center for Packaging and Unit Load Design. Read Rick’s full bio.
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