Why Toilet Tissue Is Like Tequila

When told that Canadian lumber is hit by a tariff, of course we first imagine homebuilding.

Instead though, we should think of toilet tissue and tequila.

Trump Tariffs

Toilet Tissue

Half of a typical paper towel comes from Canada. Similarly, Canadian pulp is 30% of our bathroom tissue.

Now, it appears that the two million tons that we typically import could be as much as 50% more expensive. Pulp experts say the U.S cannot substitute American wood pulp because NBSK (northern bleached softwood kraft) has tensile strength that is tough to replace. If the tariffs put Canadian sawmills out of business, the U.S. toilet paper supply could be pinched:

Tequila

Like toilet tissue, tariffs could cause the price of tequila to rise. But the reasons are a bit different.

The U.S. has been drinking more tequila:

And now, we are importing even more.

Expecting a tariff, individuals and restaurants appear to be stockpiling tequila inventories. Reuters reports anecdotally that consumers, anticipating tequila price hikes, have bought extra bottles. They also tell us that one restaurant says it ordered 120 cases–a six month supply–instead of 20.

We can hypothesize that stockpiling helped to elevate recent tequila shipments:

Our Bottom Line: Incentives

Indeed, whether it’s toilet tissue or tequila, taxes change incentives. For now, a higher tariff on Canadian lumber will nudge the price of pulp skyward. Consequently, Canadian sawmills could close, toilet tissue prices could rise, and we might wind up with a run on toilet paper and paper towels. Meanwhile, with tequila, if demand is inelastic, price hikes might have minimal impact.

Below, I’ve copied one line of a table that displays tequila’s hefty slice of liquor imports and a tariff’s impact:

The one thing we can be sure of is the regressive impact of the Trump tariffs. Whenever, the tax is the same amount for all of us, it is regressive because the less affluent hand over a higher proportion of their income. Whether it’s toilet paper or tequila, the poor will pay “more.”

My sources and more: Thanks to WSJ, MSN, and Sherwood for our tequila facts. Then, for Canadian lumber yahoo finance had the toilet paper story.