By Promit Mukherjee and Kyaw Soe Oo
ST CATHERINES, Ontario, Nov 5 (Reuters) - Alain Ouzilleau spent 40 years building Cabico into one of Canada's biggest kitchen cabinet makers. Now, he is reluctantly weighing something he has never before considered: moving production to the United States.
US tariffs on Canadian kitchen cabinets are set to double to 50% on January 1, threatening thousands of small manufacturers that employ almost 25,000 people, Ouzilleau said.
Cabico shipped 90% of its products to
the US before President Donald Trump returned to office and began imposing tariffs on Canadian goods. Now the threat of more tariffs poses an existential risk to the Quebec-based company and many of its peers, Ouzilleau said.
"That brings us to a fact, to a very unwilling option, that we start looking to have some US partners to produce some products in the States," he said.
The kitchen cabinet industry is part of the broader softwood lumber sector, among the main industries hit by US tariffs, alongside steel, aluminum and automotive manufacturing.
Unlike steel and autos, kitchen cabinet makers rarely dominate the tariff headlines. The industry is highly fragmented, comprising thousands of small, labour-intensive companies that are particularly vulnerable to rising costs and falling orders, and has shed more than 10% of its workforce since Trump first imposed tariffs.
While Canada's economy has avoided mass layoffs and grown modestly despite US tariffs, the uncertainty has wreaked havoc on small businesses. Furniture makers were already struggling with an influx of cheap Chinese products, according to interviews with three wood product manufacturers.
In the last five years, Cabico has invested roughly C$30 million ($21 million) to expand capacity and automate processes at its two plants in Quebec and Ontario and better serve the US market. However, as tariffs took hold, its volumes shipped to the US fell by 25% from 2024 levels and it had to lay off more than a quarter of its 700 employees.
IMPORTS UNDERCUT PRICES IN CANADA
Last year Trump signed an executive order slapping a 25% duty on Canadian kitchen cabinets under Section 232, the US national-security tariff, aimed at stopping Asian manufacturers from routing goods through Canada to dodge American duties. The tariff increase to 50% from January 2027 also applies to bigger sectors including autos. A Honda Motor executive said it would be "catastrophic."
Luke Elias, president of the Canadian Kitchen Cabinet Association and president of the Ontario-based Muskoka Cabinet Company, said Canadian furniture makers became collateral damage. "The tariffs have been devastating for the industry," he said, adding that many companies would shut if the rate doubles next year.
Elias said imports have undercut prices and flooded the market so heavily that Canadian companies are operating at just over half the capacity of three years ago. Efforts to sell excess capacity at home have failed as cheaper Chinese products captured the market, he said.
Muskoka Cabinet has cut 40% of its 70 staff, is operating three days a week and has stopped all investment to save costs and stay afloat, he said.
The situation worsened after talks between Ottawa and Washington collapsed in August and Washington imposed new tariffs covering even more parts of the cabinet industry.
"The subsequent announcement of how they stack on the Sec 232 tariffs was particularly bad," said Dave Schellenberg, chief financial officer at Manitoba-based Decor Cabinet Company.
To keep its US customers, the company absorbed part of the tariff cost, and its margins shrank considerably. "We viewed it as a partnership and sharing in some of that pain, both from a customer perspective as well as ourselves," he said.
The company also uses a federal work-sharing program, which cuts working hours to avoid layoffs, to retain skilled labor.
25% SURTAX
After lobbying, cabinet makers won temporary relief in July. Canada's Finance Department announced a provisional safeguard measure, a 25% surtax on imports of certain wood cabinets and vanities for up to 200 days, while the Canadian International Trade Tribunal investigates whether a surge in imports is harming domestic producers. The inquiry ends January 15, and the government will review the findings and assess whether to apply final safeguard measures.
Canadian steelmakers have similarly lobbied and obtained some protection from imports as they also struggle with US tariffs.
Manufacturers said the surtax has not stemmed imports, and many want a duty of at least 100%. The US and Canada resumed talks ahead of the US midterm elections as the tariffs proved unpopular in several battleground states.
"I have to admit that my hopes are getting a little bit lower," Ouzilleau said on the prospect of a deal.
($1 = 1.3991 Canadian dollars)
(Reporting by Promit Mukherjee in Ottawa, Fergal Smith and Kyaw Soe Oo in Toronto; Editing by Caroline Stauffer and Nia Williams)
