The current state of Canada-U.S. plastics trade

From adjusted brand commitments, rising regulatory requirements, evolving macroeconomic headwinds, and shifting trade dynamics, stakeholders of the recycled plastics industry are faced with various priorities to juggle going into 2026. Trade tariffs were one of the most prominent topics that dominated market discussions throughout 2025, as trade continues to play a pivotal role within the global plastics recycling industry.

Even without the looming tariff question, stakeholders have had their hands full with several legacy challenges — namely tight margins, material oversupply, and thinning demand. However, as global trade tensions have ratcheted up, the macro uncertainty the recycled plastics industry faces is unlike anything we have seen before.

Canada is one of the largest trading partners to the U.S. for recycled plastics, and due to most of this recycled plastics trade being tariff exempt under the United States-Mexico-Canada Agreement (USMCA), this sector has seen minimal impacts from recent tariff shifts. That said, trade dynamics are still set to play a significant role in shaping the 2026 recycling plastics outlook in both regions and beyond. 

As we move in 2026, here are several key items that the recycling industry needs to keep in mind in relation to trade, and how these interconnected landscapes are still going to play a foremost role in each other's recycling success. 

Understanding the U.S. trade and supply landscape 

Competition for post-consumer and food grade material remains a foremost headwind throughout the recycled plastics industry. This is especially true in the U.S. which continues to grapple with long-standing shortages of high-quality domestic feedstock collection. This is further compounded by the prevailing preference among many stakeholders who have grown weary of coping with these domestic challenges and rather prefer to tap into the high-quality feedstocks that can be imported from abroad. 

To date, many trade suppliers have absorbed increased tariffs, which has heaped further pressure onto U.S. recycled plastics players who need to find a way to remain competitive with low cost imported materials — resulting in shrinking profit margins that have even caused some U.S. recyclers to pause or even completely shutter operations. 

U.S.-Canada recycled plastics outlook in 2026 

Despite broader tariff tensions between the countries regarding other industrial sectors, because of the carve outs in the USMCA, Canada's presence in the U.S. recycled plastics landscape is likely to remain relatively consistent in the year ahead and vice versa.  

Canada's role as an indispensable recycled plastics partner to the U.S. cannot be understated — most notably when it comes to providing the U.S. with access to high quality polyethylene terephthalate (PET) and polyethylene (PE) scrap.  

While the U.S. has notoriously faced challenges in terms of securing domestic PET and PE scrap due to low collection rates and high contamination rates, Canada's EPR programs, high consumer awareness and higher collection rates, has made Canada a "go-to" source of scrap for U.S. players. In addition, because of the proximity between the countries, importing Canadian scrap enables U.S. players to limit logistical costs significantly. 

While Canada may have more ready access to scrap, it remains significantly limited in recycling infrastructure to convert the scrap to flake or pellet. On the other hand, the U.S. remains home to the most robust recycling infrastructure in North America, holding the largest recycling capacity volumes in the region.

This dynamic reinforces just how key the U.S. and Canada are to one another in terms of spurring on plastics recycling and overcoming respective bottlenecks. This also underlines just how disruptive potential future changes in trade policy could be to the recycled plastics supply chain in both countries.  

The biggest picture recycled plastics outlook for 2026 

Given that many of the pain points the recycled plastics industry faced in 2025 are likely to persist for the foreseeable future, the outlook for 2026 builds on escalating brand demand, growing price segmentation for higher quality recycled materials, and competitive tensions between the recycled and virgin polymer markets.

As these pressures on the recycled plastics landscape continue to evolve, transitioning into 2026 may reveal whether the feedstock network, trade flows, and long-term contracting strategies can scale efficiently to meet regulatory requirements and ambitious brand circularity targets.

Market conditions remain mixed as facility closures occur alongside new capacities coming online. At the same time, trade dynamics are shifting as companies adjust to tariff changes and brands reevaluate their sustainability commitments. As these forces converge, participants across the plastics and recycling value chain must realign their strategies to capture the opportunities emerging in their markets.

For stakeholders, understanding the risks and advantages embedded in their supply chains will be essential for success. Aligning decisions with policy developments and sustainability goals will position companies to generate resilient growth and capitalize on the plastics recycling sectors evolving circularity demands.