Canadian cabinet makers face higher U.S. tariff pressure as duties on exports are set to double

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Canadian cabinet makers face U.S. tariffs

Highlights

U.S. tariffs on Canadian kitchen cabinet exports will double from the current 25% rate in January 2027, threatening a sector employing nearly 25,000 people.
Cabico, which previously shipped 90% of its products to the U.S., saw exports fall 25% in 2024 and cut over a quarter of its 700 employees despite a C$30 million investment in automation.
Canada imposed a temporary 25% surtax on certain wood cabinet imports from July for up to 200 days, but manufacturers report continued pressure from cheaper Chinese products and stalled U.S. trade talks.

Tariff increase pushes manufacturers toward U.S. production

As reported by Reuters, cabinet makers in Canada say the tariff increase threatens thousands of smaller producers across a sector that employs nearly 25,000 people. Alain Ouzilleau, who built Cabico into one of Canada's biggest kitchen cabinet makers, said the Quebec-based company is now reluctantly considering producing some goods in the United States through local partners.

Cabico previously shipped 90% of its products to the U.S., but volumes sent south have fallen 25% from 2024 levels as tariffs took effect. Over the past five years, the company invested about C$30 million to expand capacity and automate operations at plants in Quebec and Ontario, yet it has still had to cut more than a quarter of its 700 employees.

The kitchen cabinet business sits within the wider softwood lumber sector, one of the Canadian industries most exposed to U.S. trade duties alongside steel, aluminum and autos. Last year, President Donald Trump signed an executive order imposing a 25% Section 232 duty on Canadian kitchen cabinets, and that rate is set to double from January 2027 as part of a broader tariff escalation that also affects larger sectors.

Job losses deepen as imports and stalled talks hit the sector

Luke Elias, president of the Canadian Kitchen Cabinet Association and president of Muskoka Cabinet Company, said the industry has become collateral damage in the trade dispute. He said many manufacturers would shut down if the tariff rate doubles next year, after already operating at just over half the capacity of three years ago.

Muskoka Cabinet has cut 40% of its 70 workers, moved to a three-day workweek and halted investment to conserve cash. Elias said the company has also absorbed part of the tariff burden to keep U.S. customers, compressing margins further, while using a federal work-sharing program to reduce hours and avoid deeper layoffs.

The pressure has been compounded by an influx of cheaper Chinese products into Canada, leaving domestic producers struggling to sell excess capacity at home. After talks between Ottawa and Washington collapsed in August, Washington expanded tariffs to cover more parts of the cabinet industry, worsening conditions for manufacturers.

Canada's Finance Department introduced temporary relief in July through a provisional 25% surtax on imports of certain wood cabinets and vanities for up to 200 days while the Canadian International Trade Tribunal examines whether import growth is harming domestic producers. The inquiry ends January 15, after which the government is due to review the findings and decide whether final safeguard measures are warranted, although manufacturers say the temporary surtax has not significantly slowed imports.

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