The wooden pallet industry confronts considerable challenges in 2025, as proposed tariffs threaten to disrupt lumber supply chains and escalate costs industry-wide. U.S. exports remain vulnerable to Chinese retaliation, while Canadian lumber tariffs could trigger a supply shortage this summer, driving raw material costs higher and compressing margins for new pallet producers.

The sector grapples with an emerging labor crisis, as enhanced immigration enforcement could significantly impact the 35% Hispanic workforce, accelerating the push toward automation. Despite these challenges, recycled pallet demand remains strong through H1 2025 due to high manufacturer inventories and cost-conscious buyers seeking alternatives to expensive new pallets. Companies are strategically stockpiling materials ahead of potential tariffs while positioning themselves to serve growth sectors like energy and housing.

Ultimately, success will hinge on maintaining operational agility, diversifying supply sources across multiple regions and suppliers, and making targeted investments in automation technologies and process optimization.

For more information, please reach out to project leads Kathleen Lauster, CFA, and Matthew Lapish, and Jeffrey Goodman. 

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