Major concerns are being expressed on both sides of the border regarding the higher US duties on Canada’s softwood lumber. The countervailing duties were increased from 14.63% to 35.19% this past August. There’s also great apprehension regarding a further US tariff possibly being applied under national security considerations.
U.S. homebuilders warn that higher lumber prices will further dampen a soft demand for new housing at a time when the country is already facing a shortage of 1.5 million new units. Squeezing Canada further out of the US market poses huge repercussions given the country provides 25-30% of the softwood lumber used in the US where 94% of homes are wood framed.
“We’re very disappointed with the latest duty increase because it serves as taxes on American builders and homebuyers, “says Jesse Wade, NAHB’s director for tax and trade policy. “We’re pushing to get both sides to negotiate, which Canadians are keen to do, but we have US producers who want to block Canadian imports.”
Softwood lumber production throughout Canada was approximately 20 billion board feet in 2024 with 60% exported to US markets. The 35.19% rate compared to 8% a year ago is further challenging an industry that already faces varied difficulties in different regions of Canada, ranging from beetle infestations to forest fires, to insufficient replanting and/or stricter harvesting regulations.
Canadian Assistance
Prime Minister Mark Carney announced various measures on August 5th to help the Canadian industry transition. Up to C$700 million (US$505.5 million) has been promised in loan guarantees, and C$500 million (US$361 million) to increase domestic processing, augment value-added production, as well as diversify markets in the longer term.
On September 5th, Carney announced a Buy Canada policy that prioritizes domestic materials for federal infrastructure projects and encourages provincial and territorial governments to do the same. He also pledged to double the pace of domestic homebuilding to nearly 500,000 new units within the next decade.
The Carney government has announced C$50 million (US$36million) for upskilling and reskilling, along with income support for more than 6,000 affected softwood lumber workers. Dave Earle, the British Columbia Trucking Association’s president and CEO, says none of this will be easy. “We provide Class I truck driving instruction to displaced forest workers, but when the big employers in a small town are sawmills that have shut down, what’s there to haul?”
Section 232 implications
Many people are further holding their breath with the possibility of the US Department of Commerce adding a further tariff on all international forest products on the basis that domestic production is essential to protect for national security reasons. The department has until late November to conclude its investigation launched the executive order signed by President Donald Trump last March 1st.
“The decision would likely apply to all countries and could include to pulp and paper, wood paneling and other forest products in addition to softwood lumber,” says Ian Dunn, the Ontario Forest Industries Association’s president and CEO. “It’s anyone’s guess what the rate might be, but we’ve heard 15% to 25% on top of the existing 35% on lumber duties.”
Wade says any Section 232 tariffs atop the existing softwood lumber duties would pose a significant challenge to homebuilders, especially if they were set at the 50% already imposed on steel and aluminum outside the Canada United States Mexico Agreement (CUSMA). “The NHAB has submitted a comment letter outlining how the inability to construct sufficient housing could also be considered a national security risk,” he adds.
U.S. homebuilders willingly pay a premium for Canada’s spruce-pine-fir (SPF) lumber because its lighter density makes it easier to use in framing homes. As a result, most of British Columbia’s softwood lumber is exported to U.S. markets at a value of approximately C$4.5 billion.
“The liquidity support and loan guarantees being provided by the Carney government in this crisis situation are helpful, particularly to small and medium-sized companies facing higher customs bond costs,” says Kurt Niquidet, the B.C. Lumber Trade Council’s president. “But trade negotiations must prioritize better access to our primary U.S. market.”
Increased domestic use won’t fill the gap. Canada only consumes seven billion of the 20 billion board feet it produces annually. “Even if we increased Canadian demand by 20%, it would be a small amount compared to our US exports,” Niquidet explains.
Selling elsewhere isn’t simple. British Columbia is best placed to build on established Asia-Pacific trade relationships but currently faces a lagging Japanese economy. China is not yet sold on the greater sustainability of wood framing over steel-and-concrete for multi-storey buildings, and it has Russia eager to provide its softwood lumber. Other foreign inroads will take effort and time.
Ontario exports 97% of its overall forest products, valued at nearly C$5.8 billion (US$4.18 billion), to US markets. In terms of lumber alone, it’s about 65%. “For Ontario in particular, it’s quite challenging to find and establish new foreign markets because of where we’re located,” Dunn says. “It just makes sense for Ontario to supply the U.S. because we’re so close to the major American markets, such as Chicago and New York City.”
The near doubling of rates from 8% until August 2024 to 14.54% to now 35% is compounding the other difficulties facing the Ontario industry that has led to some mill operations shutting down and others reducing shifts. “Trade barriers are worsening the situation in what’s already a weaker demand for new homes in the U.S. and Canada,” Dunn explains. “Plus, there’s the higher costs of insurance, trucking and the challenges of recruiting and maintaining a workforce.”
A further rate imposed under Section 232 has the potential of eliminating all Canadian lumber shipments to the US, Dunn warns. “The resulting oversupply in the Canadian domestic market would tank the price and we’d see mills curtail their production,” he adds.
Dunn says the Ontario Forest Industries Association welcomes Prime Minister Mark Carney’s financial assistance to date. “The program’s details are yet to be worked out and the C$700 million loan guarantee program can be eaten up quickly by the $10-billion industry, but we’re encouraged by the steps being taken,” he says.
As for the $500 million dedicated to domestic homebuilding and market diversification, Dunn says the industry needs to establish what’s what first with the U.S. marketplace. “We’re also excited to contribute to the ambitious projects that Premier Doug Ford has announced for Ontario homebuilding, as well as the opportunity to use more forest biomass for energy production, but we’re facing an immediate cliff with the 35% and potentially higher tariffs with our biggest U.S. market.”
US Industry Challenges
The U.S. has been attempting to close the domestic gap in different ways but with varied success. At the end of August, softwood lumber in the U.S. was priced at its lowest all year ($18 per 1,000 board feet). “We believe it’s mainly because of slowing demand for single-family home permits since the start of 2025 because of cost uncertainties and continuing affordability challenges,” Wade says.
Over the last decade, significant American and Canadian investment has gone into increasing the U.S. domestic supply produced by the US South (Alabama, Arkansas, Georgia, North Carolina and South Carolina). B.C. firms have invested to offset lower Canadian sales resulting from US duties, revised logging regulations, and reduced forest supply. However, mills are currently operating at or near a loss with production curtailments necessary with price challenges and cost uncertainties perpetuating the soft demand for new home construction. “It takes about nine months to build a new home, and the lumber is only purchased once construction begins,” Wade shares. “And, right now, it’s hard to say what that lumber will cost.”
If the demand resurges in 2026 based on greater price certainties, the market could seriously be undersupplied in terms of lumber at a time when homes are desperately needed, according to Wade.
The US has roughly quadrupled lumber imports from other countries since the softwood lumber agreement with Canada ended a decade ago. However, these imports – mainly from Germany and Sweden – tend to be more expensive to buy and ship. Even with duties, Canadian softwood has been selling at about $400 per 1,000 board feet compared to $600 per 1,000 board foot for German or Swedish products.
While President Trump has aimed to fill the supply gap by issuing an executive order that deregulates logging in U.S. national parks, the country has neither the sawmills nor workforce to do so. Forest experts Russ Taylor of Russ Taylor Global and David Elstone of Spar Tree Group say it would take decades to establish the labour and supply chain to increase timber harvesting, including the 70 new large-scale U.S. sawmills that Resourcewise estimates is necessary for the U.S. to achieve self-sufficiency.
Steep Housing Implications
The current 35.19% duty, along with any steeper tariff, is detrimental to US homebuilders and homebuyers longer term, warns Rose Quint, NAHB’s assistant vice president, Survey Research. “Right now, based on the announced tariffs, homebuilders expect it will cost an additional $10,900 per home based on the higher costs of tariffs on not only lumber, but also aluminum, steel and copper,” she says.
Higher mortgage rates of 6% to 7% since 2022 have already weakened housing demand and caused lumber prices to edge downwards. The real effect of tariffs might be delayed by wholesalers having stocked up building materials earlier in the year to avoid higher tariffs.
“Years of building above and beyond our traditional baseline is required to make up the 1.5 million deficit that we have in new housing units,” Quint adds. Since the 2010s, the U.S. has been constructing approximately 21,000 housing units per one million population, compared to 40,000 in earlier decades. The shortfall derives from various factors that include a chronic shortage of workers, which is a problem being compounded by current immigration policies, along with a lack of available building lots and higher post-pandemic building costs. “We saw building materials increase 15% in costs in both 2020 and 2021, and while they’ve risen less since then, they’ve never reverted to where they were before COVID,” Quint notes. “Cumulatively, they’re now 43% higher than prior to 2020.”
Affordability challenges already existed and will be further worsened by the higher costs.
“Homebuilders are already doing all they can to meet buyers where they are by shifting their entire production line to more affordable smaller homes on smaller lots, as well as streamlining options, providing incentives such as covering the closing costs or buying down mortgage rates,” Quint shares.
The overriding hope among the Canadian producers and American homebuilders is that a suitable agreement will be reached between the US and Canada. “There seems to be progress,” Dunn says. “President Trump isn’t necessarily beholden to the American industry, and he always wants to make a deal.”