Plastics Pulled Into U.S.-Canada Tariff Turmoil

Canada's reciprocal tariffs order slaps a 50% rate on polyethylene bags, stoppers, lids, caps, other closures and table ware — pulling plastic packaging squarely into the U.S.-Canada trade war.

Alongside impacts from the war with Iran, these tariffs rank among the most pressing issues for plastic packaging producers right now, according to Rabobank. Canada's order, effective Sept. 8, 2026, also imposes 15% tariffs on various molds for manufacturing plastic, metal and rubber products.

Companies sifting through the tariff codes are not always clear about which products the Harmonized Tariff Schedule covers and which it does not. The confusion extends beyond plastics. Hugues Simon, CEO of Canada-based fiber packaging company Cascades, said on an August earnings call that different products of the same fiber grade are not treated equally under the two countries' tariffs. Montreal's The Gazette reported this week that a plastic air pillow manufacturer faces similar challenges.

"It's up to the exporters and importers to identify what the correct codes are," said Jim Owen, senior packaging and logistics analyst at Rabobank. "Depending on the size of the converter and your influence over the supply chain, there's probably a lot of confusion."

Owen noted in a recent report that about 20% of the roughly $15 billion U.S.-Canada plastics trade is exposed to the 50% tariffs the U.S. imposed on $20 billion of Canadian goods in July. The situation remains dynamic, and the scope could grow.

"I wouldn't be surprised, until we come to a resolution, that there would be continued fluctuation in what's hit and how hard," Owen said.

Quick tariff changes combined with the uncertainty create volatility that puts affected converters at short-term margin risk, Owen said. Committing to a fixed-price purchase order becomes difficult because costs could swing significantly between the time of a bid and fulfillment.

The Section 338 duties stack on top of base duties and apply even to goods covered for free trade under the U.S.-Mexico-Canada Agreement, Owen explained.

"We spent 30 years making this a well-oiled machine with free trade on plastic and molds and resins and additives," Owen said. "It's a pretty big shift to add some friction into that equation."

The war with Iran adds another layer of stress. The conflict passed the six-month mark in late August, and polyolefins have borne the brunt of its effects this year. Hope of a resolution emerged in June, but supply chain disruptions and price spikes returned after fighting resumed in July.

While polyethylene and polypropylene producers have reported surging profits, packaging converters face significantly higher costs for materials, energy and transportation.

North American PE and PP producers typically use ethane, which costs less than the petroleum-derived naphtha that Asia and Europe rely on. With oil supply disruptions and price spikes tied to the war and the Strait of Hormuz closure, global demand has grown for lower-cost North American polyolefins, which producers increasingly export to other markets.

That squeezes some U.S. converters, who lose the advantage of buying lower-cost domestic material as producers ship it abroad or raise prices. "There's people eating margin right now that make it very challenging to deliver on yearly or quarterly results," Owen said.

The geopolitical and economic pressures now in play could leave a lasting mark on plastics markets. "With the Strait of Hormuz doing what it's done to plastics, as well as the consumer rut that we're in where demand is low, it's quite a challenge," Owen said. "And I don't see a huge change coming in the next several years."