The European pulp and paper (P&P) industry is struggling to assess the possible impact of tariffs.

First, US President Donald Trump announced a 10% blanket tariff on all goods imported to the US. Additionally, he announced higher “reciprocal” tariffs with those he deemed worst offenders. This included a 20% tariff on EU goods. He later backtracked on April 9, pausing the tariffs for 90 days while leaving the 10% levy.

Most goods from Canada and Mexico are exempt from tariffs. However, the exemption only applies if the goods comply with United States Mexico Canada Agreement (USMCA) terms.

Europe has a marginally negative trade balance with the US for pulp and paper. In 2024, it imported 2.6 million tonnes of P&P from the US. In the same year, it exported 2.3 million tonnes of P&P to the country, according to Eurostat. The largest trade deficits appear to be around pulp (-975,000 tonnes) and containerboard (-310,000 tonnes, mostly kraftliner). On the other hand, Europe has a surplus in graphic paper and cartonboard sales.

“As the line has been crossed and US tariffs have been announced, we are now working hand in hand with the services of the [European] Commission to respond quickly, vigorously and in a proportionate manner,” Cepi director general Jori Ringman said of the US tariffs.

“The only certainty we have is that there will be negative consequences for businesses on both sides of the Atlantic. Trade wars are always detrimental for consumers, but we are a ‘made in Europe’ industry, with local capacities to meet the European demand,” he added.

Graphics under pressure
In 2024, Europe imported around 135,000 tonnes of graphic paper from the US. It exported some 812,000 tonnes, mostly coated papers and uncoated woodfree (UWF) grades. During the year, the US experienced a trade deficit with Europe of 70,000 tonnes of uncoated mechanical paper and 113,000 tonnes of coated mechanical paper. Additionally, the deficit included 204,000 tonnes of UWF paper and 299,000 tonnes of coated woodfree (CWF) paper.

This might be an issue for European graphic paper producers, since the European market is facing overcapacity for most grades. The market is also facing high production costs and tight margins.

“There will be less graphic paper being sold in the US so Europeans will have to keep it in Europe,” one market commentator said.

Paradoxically, tariffs on Europe might favor European newsprint producers by making newsprint imports from Canada less logistically convenient.

“US tariffs on Europe will cause an increase in freight rates from North America to Europe and this would have consequences on Canadian imports of newsprint,” one European market participant said.

On the woodfree side, some market sources believe Asian producers might increase their exports into Europe. This is because, pre-April 9 suspension, the US had imposed significantly higher tariffs on South Korea, Indonesia and Thailand. It also continues to enforce massive tariffs of 125% on China.

In 2024, the four countries exported 201,000 tonnes of UWF paper and 307,000 tonnes of CWF paper into the US.

According to Fastmarkets director of Europe packaging and graphic paper Alejandro Mata, the announced tariffs bring a significant shift in the impact on the graphic paper market of previously-announced tariffs that threatened trade flows between the US and its closest trade partners, Mexico and Canada.

“Initially, this disruption could have created opportunities for European producers to expand their presence in the US market,” Mata said.

“However, the situation has changed. Canadian paper trade with the US will likely be exempt from tariffs due to the USMCA, while the EU is facing an import tariff. As a result, rather than enjoying a small opportunity to increase exports, Europe is now more likely to experience a decline in exports to the US and an increase in imports from Asia, which faces even higher taxes than the EU.”

Cartonboard market worried
The European cartonboard market could be one the hardest hit by tariffs, should they go through as announced. Europe exports around 600,000 of tonnes of cartonboard to the US each year, mainly folding boxboard (FBB). It imports over 200,000 tonnes of other grades from the US.

“There are no FBB producers in the US. If they need to buy it in Europe it will be very expensive [with the tariffs],” one market source said.

“Also, it means there might be more of the grade staying in Europe,” the market source said. They added that the market was already well-supplied.

According to Fastmarkets RISI economist Camila Jaramillo, there is a total surplus capacity of around 1 million tonnes per year for cartonboard in Europe. This is down considerably from the total a few years ago, but it remains high.

“Either mills will need to swallow the increase [cost from tariffs] — and I don’t think that is going to happen — or they are going to have to cut capacity,” another market source said.

Some producers will also try to pass on the price increases to customers in the US, market sources said. On April 3, one cartonboard supplier to the US, Metsä Board Americas Corporation, announced it intended to apply a 20% price increase across several of its clear product lines. The announcement came in response to the government’s 20% tariff on EU imports at that time.

The European Cartonboard Makers’ Association (ECMA) meanwhile said it did not expect a major impact on folding cartons.

“ECMA’s core focus is with converters of folding cartons. In general, the flow of European manufactured folding cartons to the US is limited, hence the impact on converters is also limited,” ECMA managing director Mike Turner told Fastmarkets.

Containerboard confidence
European containerboard exports to the US, primarily of low-grammage kraftliner, are less significant than cartonboard exports. Nonetheless sources expect that there could be some fallout from any changes to them.

“You could call the volumes involved insignificant,” a buyer active in the US market said, “but we have got a lot of offers [in the US from European sources]. European kraftliner producers have absolutely seen the US as a potential outlet for their tonnages. [If there is a tariff-linked drop in exports] this will certainly hit their confidence.”

“[European unbleached kraftliner] mills will be less pushy [in European price negotiations] if they can’t export to the US,” another market observer said.

US NBSK buyers to pick up the bill
The EU exported around 496,000 tonnes of pulp to the US in 2024. Almost all of it bleached softwood kraft (BSK) pulp, according to data from Global Trade Tracker. The EU imported 1.185 million tonnes of pulp from the US last year. This included 990,000 tonnes of BSK, much of it fluff pulp.

Many European pulp market participants were taking a “wait-and-see” approach to the tariffs. This was in part to allow time to evaluate the situation, but also to see what impact any potential EU countermeasures and trade negotiations might have.

One northern bleached softwood kraft (NBSK) producer said their next vessel to the US would arrive in May.

“We are preparing, and we will read up and keep informed, but we will not make any concrete changes since the situation may be completely different in May,” they said.

Multiple European NBSK producers said their customers in the US would be the ones paying for the tariff. They also said this was clear on the buyer end.

“One of our biggest customers is completely on board and they will increase prices on the products they sell in the US,” a seller said.

However, some sources expected that, in time, US-based pulp buyers might change their buying pattern. One possible scenario, one source said, was for more Canadian pulp to go to the US and less to China. This would leave more room for European NBSK in China.

European buyers of NBSK or bleached eucalyptus kraft (BEK) pulp reported no immediate changes in behavior of their suppliers either.

In Europe, the tariff discussions have so far centered on NBSK. However, with the US slapping 10% tariffs on BEK from South America, this might also have an impact on BEK trade flows.

Markets face uncertainty
Most market participants believe the stuttering trade war initiated by Trump will further hurt the already stagnating European economy, thus additionally reducing paper demand. Stock markets reacted to the prospective tariffs by posting huge losses.

On April 7, EU officials said they were still willing to negotiate with the US. They even offered a zero-for-zero tariff regime for industrial goods. But EU trade commissioner Maros Šefčovič also said the bloc was ready to impose counter tariffs as appropriate.

“The current trade situation with the US, our most significant partner, is in a tough spot,” Šefčovič told a press briefing following an EU Foreign Affairs Council meeting, before the April 9 suspension.

“A range of tariffs is hitting significant portion of EU exports. In fact, €380 billion ($416 billion) worth of EU exports to the US, 70% of our total exports, are facing tariffs of 20% or 25%, or even higher when combined with existing most-favored-nation tariffs like 27.5% duty on passenger cars altogether,” he said.

Šefčovič added: “While the EU remains open to and strongly prefers negotiation, we will not wait endlessly… Until we see tangible progress, we will be working along three tracks: defend our interests though countermeasures, diversify our trade through new agreements and deter harmful trade diversions.”

European market sources are watching what the EU will do in the coming weeks in terms of reciprocal tariffs. The Commission sent a list of goods and proposed tariffs to member states on the evening of Monday April 7. These measures were approved by member states on April 9. However the full list of goods included is not expected until April 14.

The first measures are due to come into force on April 15. A second set of measures will be introduced between May 15 and December 1.

Šefčovič added it was in the EU’s interest to strengthen trade and investment ties with its global partners. He said this would be achieved by accelerating ongoing negotiations on free trade agreements with those countries.

Source: fastmarkets.com