Navigating The U.S. Tariffs

Tariffs have long been used by governments to protect domestic industries, regulate trade, and correct economic imbalances. However, they often come with wide-ranging consequences, disrupting supply chains and industries on a global scale. The latest tariff adjustments are no exception.

These tariffs primarily target steel and aluminum — critical materials for the packaging industry — causing widespread concern among manufacturers and suppliers. Here’s a brief breakdown of the new rates -

By country:

• Canada & Mexico: Initially a 25% tariff on all goods was announced; however, on March 6, 2025, President Trump suspended these tariffs for 30 days, providing a temporary reprieve until April 2, 2025. This exemption was first floated for Mexico and later expanded to Canada. Additionally, Canadian potash fertilizer is exempt from new duties, while a 10% tariff remains on certain Canadian energy imports not covered by the USMCA.
• China: As of March 4, 2025, the U.S. increased tariffs on all Chinese imports to a total of 20%, building upon the initial 10% tariff implemented on February 4, 2025, reflecting ongoing trade tensions.
• Other Countries: A universal 25% tariff on steel and aluminum imports will take effect on March 12, 2025, reinforcing a broad protectionist stance. This includes downstream products like wires, pipes, and packaging foils.

How Does This Impact Packaging Materials?

Steel and aluminum are indispensable for packaging, particularly in cans, foils, and flexible packaging. The tariffs will significantly raise costs for food and beverage packaging, with industry leaders already expressing concern. The Aluminum Association warns that domestic production capacity falls short of demand, making imports essential. This dependency — now compounded by tariffs — will likely lead to rising costs and supply chain disruptions.

How Is the Industry Reacting?

The announcement of these tariffs has led industries reliant on steel and aluminum to adopt strategic measures to manage financial and operational impacts -

Coca-Cola’s Shift in Packaging Strategy

Coca-Cola is considering a shift from aluminum cans to plastic bottles in response to rising aluminum costs. While aluminum remains the preferred choice for its recyclability and sustainability, affordability concerns may drive this transition. This change could require overhauling packaging lines, investing in new machinery, and renegotiating supplier contracts.

Concerns from the Plastics Industry Association

While some businesses may turn to plastic as an alternative, the Plastics Industry Association has warned of supply chain disruptions and rising raw material costs. 

Supply Chain and Cost Implications for Flexible Packaging

The flexible packaging industry faces significant cost pressures, necessitating adjustments in sourcing, pricing, and market positioning -

Higher Material Costs

With a 25% tariff on steel and aluminum, packaging materials — especially aluminum foil — will become markedly more expensive. Manufacturers must decide whether to absorb these costs or pass them on to consumers.

Adjusting Supply Chains

To mitigate cost hikes, companies are actively pursuing several strategies:

• Domestic Sourcing: Increasing reliance on locally sourced materials to reduce dependency on imports, stabilize costs, and ensure supply consistency.
• Supplier Diversification: Companies are diversifying their supplier base to reduce reliance on any single region. 
• Product Tweaks: Manufacturers are also considering product modifications to reduce material usage or switch to more cost-effective materials.
• Shrinkflation: Some companies are adopting strategies like reducing package sizes (shrinkflation) to maintain profitability without raising prices.

Seeking Tariff Exemptions

The flexible packaging sector is actively seeking tariff exemptions for critical inputs, which could provide relief if approved. Additionally, if manufacturers switch from metal to plastic packaging, they might benefit from reduced costs associated with these materials. While this shift may reduce costs, it could also impact brand perception, particularly among consumers prioritizing sustainability.

Market Competitiveness and Material Alternatives

The increased cost of steel and aluminum will force many brands to explore alternative packaging materials.

Our Key Takeaways and Strategic Recommendations

With the announcements posing significant challenges for the packaging industry, we are committed to guiding businesses through these complexities with practical and effective strategies. Below, we outline key takeaways to proactively enhance supply chain resilience, manage costs proactively, and ensure a stable and reliable supply of all materials:

Expanding and Strengthening Supply Sources

• Diversifying supply sources: This is essential to mitigating risks from tariffs and trade disruptions.
• Rules of Origin Compliance: Ensure compliance with trade agreement requirements by meticulously tracking raw material origins and maintaining accurate documentation like certificates of origin to qualify for tariff exemptions or reductions.

Proactive Cost Management

With tariffs driving up costs, companies must adopt strategies to maintain financial stability and operational efficiency. Consider the following:

• Enhancing Transportation Efficiency
• Strengthening Procurement Strategies
• Supplier Relationship Management (SRM)
• Renegotiating Supplier Contracts

Ensuring a Reliable and Uninterrupted Supply

A stable material supply is crucial to avoiding disruptions and meeting production demands. Consider:

• Robust Inventory Management
• Transparent Customer Communication
• Contingency Planning
• Enhancing Supply Chain Visibility

Looking Ahead: Adapting with Confidence

With rising costs and shifting supply chains, the flexible packaging industry must make strategic adjustments to stay competitive. Companies will need to evaluate materials, optimize sourcing, and strengthen supplier relationships. Junish remains committed to ensuring reliable supply and supporting customers in managing these changes with clarity and confidence.