A $4 million tariff bill is becoming another reminder of how deeply the Canada-U.S. trade dispute is affecting Canadian manufacturers. Quebec-based packaging giant Cascades Inc. says new trade barriers added millions to its costs during the third quarter of 2026, putting additional pressure on a business already dealing with expensive raw materials, transportation challenges, and unpredictable customer demand.
The company reported the financial impact on November 5, revealing that tariffs continued to undermine improvements in its packaging operations despite stronger overall sales.
With more than $1.2 billion in quarterly revenue, Cascades remains a major player in North America’s packaging industry. However, its latest results demonstrate how even established manufacturers are struggling to protect profitability as tariffs complicate cross-border business.
A $4 Million Tariff Hit Reveals the Cost of Trade Tensions
Cascades reported approximately C$4 million in direct tariff-related costs within its Packaging Products division during the third quarter, which ended September 30, 2026. The disclosure came alongside consolidated quarterly sales of C$1.267 billion, up from C$1.238 billion during the same period a year earlier. Although the tariff expense represented a relatively small share of total revenue, it added pressure to a division already facing higher operating costs. For a manufacturer operating across several competitive markets, even modest increases in expenses can make maintaining profit margins more difficult.
President and CEO Hugues Simon said the combined effects of tariffs, raw material inflation, and transportation costs outweighed the benefits of operational improvements and pricing initiatives in packaging. The distinction matters because the C$4 million figure represents identified direct tariff expenses, not necessarily the full economic consequences of changing trade policies. Lost sales opportunities, altered purchasing decisions, and additional logistical complications can create pressures that are harder to measure. The latest disclosure therefore offers a concrete example of how trade tensions can affect everyday manufacturing decisions.
Packaging Revenue Climbed, but Profitability Remained Under Pressure
Cascades’ Packaging Products division generated C$807 million in third-quarter revenue, compared with C$797 million a year earlier and C$772 million in the preceding quarter. Despite the increase in sales, the division’s operating income declined to C$64 million from C$73 million in the third quarter of 2025. Adjusted EBITDA, a measure of operating profitability before certain expenses, also slipped from C$136 million to C$126 million year over year. These figures illustrate a familiar problem for manufacturers: selling more products or collecting higher prices does not automatically translate into stronger profits when production and distribution costs are rising.
The broader company performed better. Consolidated operating income reached C$78 million, up from C$73 million a year earlier, while net earnings attributable to shareholders increased slightly to C$30 million. Adjusted EBITDA rose to C$162 million from C$159 million. However, adjusted net earnings declined to C$34 million from C$39 million, showing that the financial picture was mixed. For investors and employees alike, the distinction between growing revenue and sustainable profitability is especially important during prolonged trade uncertainty.
Trump’s 50% Tariffs Added Another Layer of Uncertainty
The tariff pressure intensified after U.S. President Donald Trump announced additional duties on selected Canadian products on July 20, 2026. The measures, introduced under Section 338 of the Tariff Act of 1930, initially took effect on August 22 and imposed additional tariffs of 50% on a range of Canadian imports, including certain paper and packaging products. Unlike some other American trade measures, the Section 338 duties did not provide a general exemption for goods meeting Canada-United States-Mexico Agreement rules. That created another challenge for Canadian exporters that had built their businesses around established North American trade arrangements.
The rules have continued changing. American authorities revised covered product lists in September and again effective October 30, removing some packaging and paper products while adding others. That means not every Canadian packaging product faces the same tariff, and Cascades has not attributed its entire C$4 million expense to one specific duty. For manufacturers, the practical challenge is determining which products qualify, who is responsible for the import charges, and whether existing customer contracts can absorb those expenses. Even a change affecting a limited product category can require businesses to reconsider pricing and shipping arrangements.
A North American Manufacturing Network Makes Trade Stability Essential
Founded in 1964 and headquartered in Kingsey Falls, Quebec, Cascades operates approximately 60 facilities across North America and employs roughly 8,900 people. Its businesses include corrugated cardboard, food packaging, shipping containers, tissue products, and recycled-fibre recovery. The company maintains operations in Canadian communities such as Guelph, Drummondville, and Kingsey Falls, alongside American locations including Niagara Falls, New York, and Ashland, Virginia. This geographic reach allows Cascades to serve customers on both sides of the border, but it also exposes portions of its business to changes in trade rules between two closely connected markets.
The consequences extend beyond corporate financial statements. Packaging facilities provide employment for machine operators, maintenance technicians, truck drivers, and production supervisors whose work depends on reliable manufacturing activity. A sudden change in the economics of exporting a product can influence decisions about which facility receives an order, where materials are purchased, or how finished goods are delivered. Cascades has not announced that its C$4 million tariff expense will directly result in layoffs. Nevertheless, protecting competitiveness across its existing manufacturing network becomes more complicated when trade policies can alter the cost of serving customers.
Customer Demand Remains Uneven Despite Stronger Box Shipments
Cascades reported that packaging volumes remained broadly consistent with its expectations during the third quarter, although demand differed across its customer markets. Its investor presentation showed that corrugated products accounted for 54% of packaging sales, paper rolls represented 29%, and other packaging products contributed 17%. The company also reported that its North American box shipments increased 5.3% from the previous year, compared with an industry increase of 1.6% on the company’s reported comparison. That performance suggests Cascades continued to capture business even while broader economic conditions complicated purchasing decisions.
However, sales growth did not eliminate weaknesses elsewhere in the portfolio. Compared with the preceding quarter, higher box shipments were offset by lower paper-roll shipments, leaving overall packaging volume relatively stable. The company also identified uneven customer demand in certain end markets. This matters because packaging orders often reflect activity elsewhere in the economy. Food producers, manufacturers, wholesalers, and online retailers all require different forms of packaging, making Cascades sensitive to changes in their production and sales patterns. Stronger demand for shipping boxes may support one part of the business while weaker orders from other customers leave manufacturing capacity less efficiently utilized.
Rising Raw Material and Transportation Costs Compound the Problem
Tariffs were only one of several financial challenges facing Cascades during the quarter. The company also reported higher recycled-fibre costs, particularly for old corrugated containers, commonly called OCC, which are used to manufacture new cardboard and packaging materials. According to market figures included in its investor presentation, the average price of OCC in the northeastern United States reached US$88 per short ton during the third quarter, compared with US$74 in the preceding quarter and US$68 a year earlier. That represented increases of approximately 19% and 29%, respectively, adding another expense to an already pressured manufacturing operation.
Transportation costs created additional difficulties. Cascades reported that its consolidated supply-chain and logistics expense line increased to C$780 million from C$744 million a year earlier, although that broader category includes costs beyond freight alone. Higher energy expenses also affected operations. For packaging manufacturers, these pressures can accumulate throughout the production process, from purchasing recovered paper to moving finished cardboard boxes to distribution centres. Importantly, these inflationary expenses are separate from the identified C$4 million tariff impact, making it clear that trade barriers are contributing to a much broader cost challenge.
Cascades Is Raising Prices to Protect Its Margins
Cascades has been implementing selling-price increases to offset rising operating expenses and strengthen profitability. During the third quarter, higher average selling prices contributed C$42 million to consolidated sales compared with the previous year. A more favourable product mix added C$24 million, while foreign exchange movements provided another C$13 million benefit. However, these improvements were partly offset by a C$50 million negative impact associated with lower volumes and changes to the company’s operating footprint. The results demonstrate how difficult it can be for manufacturers to recover higher costs through pricing alone.
The company’s investor presentation confirmed that previously announced packaging price increases from March, April, and June were reflected in third-quarter results, with another increase announced in September expected to be introduced gradually. For customers, this creates a difficult balancing act. A food processor or online retailer may need reliable packaging regardless of market conditions, but repeated price increases can encourage businesses to compare suppliers, revise orders, or reduce other expenses. Cascades must therefore balance the need to recover manufacturing costs against the risk of weakening customer relationships. Higher prices offer protection, but they cannot guarantee stronger profits when tariff exposure and input costs remain unpredictable.
Tissue Products Helped Offset Weakness in Packaging
While packaging faced significant financial pressure, Cascades’ Tissue Papers division delivered stronger-than-expected results. The business generated C$415 million in quarterly sales, compared with C$409 million in the second quarter. Adjusted EBITDA increased to C$47 million from C$35 million, supported by selling-price increases, productivity improvements, and continued cost-reduction initiatives. The division also reported operating income of C$32 million, up from C$20 million in the preceding quarter. This performance helped offset some of the challenges affecting packaging and contributed to the company’s stronger consolidated results.
Nevertheless, the tissue business was not immune to changing customer conditions. Cascades reported that volumes in its Away-from-Home market, which serves commercial and institutional customers, declined 10% compared with the second quarter, primarily because a major customer ceased operations. Consumer tissue volumes increased 2% over the same period, helping cushion that decline. The contrasting performance illustrates the value of operating across different customer markets. Demand for household tissue products can provide support even when commercial purchasing patterns weaken. However, the division must still contend with higher fibre prices, transportation expenses, and the ongoing challenge of maintaining margins.
Debt Reduction and Operational Efficiency Remain Major Priorities
Cascades is also working to strengthen its financial position while navigating the uncertain trade environment. The company ended September with C$1.863 billion in net debt, down from C$1.879 billion at the end of June. Its net-debt-to-adjusted-EBITDA ratio improved to 3.2 times from 3.3 times. Although debt remains substantial, the improvement indicates progress toward strengthening the balance sheet. During the quarter, Cascades also invested C$47 million in capital expenditures and maintained its forecast for full-year capital spending of C$150 million to C$175 million.
Management has outlined a broader strategy focused on improving efficiency, optimizing facilities, and directing capital toward debt reduction. Cascades is targeting C$100 million in baseline annual profitability improvements by the end of 2026, reporting approximately C$80 million in improvements generated across 2025 and 2026 so far. Asset sales are another component of the strategy, with C$165 million in cumulative proceeds recorded toward a C$230 million objective now expected to be achieved in early 2027. These initiatives do not eliminate tariff risks, but they may provide financial flexibility while the company adjusts to changing market conditions.
Fourth-Quarter Outlook Signals Continued Pressure From Tariffs
Cascades is approaching the final quarter of 2026 cautiously. Management expects consolidated results to be slightly lower than the third quarter, reflecting persistent inflation, seasonal demand changes, and the continuing effects of trade disruptions. Its investor presentation projects fourth-quarter adjusted EBITDA of C$153 million to C$163 million, compared with the C$162 million recorded in the third quarter. The company anticipates packaging adjusted EBITDA of C$125 million to C$135 million, with additional pressure from fuel surcharges and recycled-fibre expenses. Previously announced price increases and operational improvements are expected to help offset some of those costs.
The broader Canadian trade picture reinforces the uncertainty. Statistics Canada reported that exports of forestry products and building and packaging materials declined 9.8% in September, even as total merchandise exports increased 0.2%. That broader category cannot be used to measure Cascades’ performance directly, and the decline cannot be attributed entirely to tariffs. However, it illustrates the uneven conditions confronting Canadian exporters. For Cascades, the next challenge is protecting profit margins while maintaining customer relationships and strengthening operations. Its C$4 million quarterly tariff expense is not a financial crisis by itself, but it demonstrates how trade policy can create measurable costs for an established Canadian manufacturer.
