Early this past year, President Trump’s tariff proposals caused major corporations to change some of their plans, such as stocking up on imported goods before tariffs were enacted. The threat of tariffs disrupted trade for much of the year. This led to economic uncertainty as tariffs were proposed, delayed and proposed again.
A major effect on the pallet market was the pulling forward in the calendar year of the winter holiday pallet purchases. This occurred because retailers were buying holiday products earlier in the year than usual to try to avoid tariffs, especially on products coming from China. Normally, the holiday pallet season starts in late August and goes through the fall into November. This year, it started in July and went through September/early October.
Earlier this fall, the McCown Container Volume Observer predicted that inbound sea container traffic for the last four months of 2025 will be down by 15.7% on a year-over-year basis. In its most recent edition, John McCown, shipping expert and the author of the report, suggested that shippers should “fasten your seat belts, as tariff declines will increase going forward.” This pull-forward effect led to a greater than normal downward trend in terms of overall pallet demand in the last quarter.
Trade tensions and increased tariffs with Mexico, Canada, Europe and China led to higher U.S. custom duty collections so far in 2025. As of late October, the U.S. Treasury raised $195 billion in customs duties, more than 250% of what it collected in FY 2024. These higher duties resulted in inflationary pressure for many products such as imported lumber, machinery, parts, supplies and other goods used by pallet companies. Many of the proposed duties have been scaled back or delayed as part of the Trump administration’s strategy. So, the inflationary pressure could have been worse even though it likely destabilized some economic growth throughout the year.
According to Thomson Reuters, studies by the Tax Foundation and the Peterson Institute for International Economics has projected that the Trump tariffs will reduce U.S. economic growth rate by 0.23 percentage point in 2025 (0.62 percentage point in 2026) and drive inflation roughly one percentage point higher. Economic reprisals from trading partners could drive these impacts higher. That was a major concern for the U.S. hardwood sector that has already been reeling from slumping domestic and international demand.
The Hardwood Federation, the trade advocacy group for the U.S. hardwood sector, warned this fall, “We fear that additional retaliatory tariffs and more trade uncertainty could devastate the industry beyond repair. Many operations across the country have already closed this year, while others are surviving only by scaling back. In either case, we have seen layoffs of good-paying American jobs in communities where those job opportunities are limited.”
The industry was concerned that Chinese retaliation for proposed U.S. tariffs could further devastate an industry that is already reeling from previous trade fights as well as competition from knock-off products. The Hardwood Federation, recently called for the Trump administration to include the hardwood industry in any trade assistance programs addressing agriculture industries negatively impacted by trade and tariff policies.
Explaining the dire situation, the Hardwood Federation stated, “Unfortunately, the industry faces extraordinary challenges. Prior to 2018, hardwood lumber was the second most exported U.S. product to China, behind only soybeans. When China imposed retaliatory tariffs that year, American hardwood exporters lost half their market share to competitors in Russia, Thailand, Malaysia and elsewhere. Even once those tariffs receded, regaining those markets has proven extraordinarily difficult.”
Since 2018, lost commercial opportunities total more than $9 billion, weakening sawmills, logging operations, and lumberyards across the country. While many agricultural producers received targeted relief to offset retaliatory tariffs, the hardwood industry did not. The numbers are alarming. From 2022-2024, hardwood exports product exports decreased $930 million, and the hardwood industry lost 40,000 jobs (down 10%). This year U.S. hardwood exports to China have come to a standstill because of the trade war.
The good news is that top leaders from the United States and China have reached a temporary trade deal on some of the major issues between the two countries. In exchange for rolling back tariffs and other measures, China agreed to do many things including buy more American agriculture products (including hardwood and softwood logs). Given continued trade tensions with China, the hardwood sector is concerned that any reprieve from the deal will be short lived. Beijing agreed to buy more agricultural products from the United States including hardwood and softwood logs. But the details and follow through have yet to happen.
The trade war has also affected the flow of Canadian softwood lumber coming across the U.S. border. Tariffs can stack on top of existing anti-dumping and counter-vailing duty cases, such as the current ones on Canadian lumber imports. These tariffs combined with the rising duties in the Canadian softwood import cases have made Canadian lumber substantially more expensive. Some companies are still buying Canadian lumber. Most have switched to domestic sources, and some Canadian companies have opted to ship pallets instead of lumber across the border. When new duty rates were set this year, the antidumping duty order rose from 7.66% to 20.56%, and the countervailing duty rates increased to 14.63%, up from 6.74%. An additional 10% tariff was added in late 2025 as part of broader “national security” actions, layering onto existing duties.
As we enter 2026, the real good news is that trade deals are in the works or already have been developed with key trading partners. The Trump administration seems to understand that its tariffs are causing backlash at home, and are unpopular with many voters. Pressure is growing on the Trump administration to take a more measured approach to its trade war. But uncertainty is the only thing we can know for sure when it comes to how President Trump will respond. Most pallet companies are hoping that tariffs become less front and center in the news in 2026.
