Days after President Trump slapped a 25% tariff on all lumber coming from Canada and Mexico (plus an additional 10% tariff on Chinese-imported wooden products), the US supply chain (which relies on Canadian lumber to meet about 30% of domestic demand) is bracing to increase prices to recoup losses.
“Tariffs unequivocally work to push up lumber prices, (and) when that happens, it usually adds up to higher prices for consumers,” according to Rajan Parajuli, an associate professor of forest economics and policy at New York State University. “When domestic prices rise, US companies benefit from increased profits (at least in the short term) as US consumers have to pay more for imported lumber, so long as demand for building materials and other lumber products stays steady.”
Using the 2006-to-2015 US-Canada Softwood Lumber Agreement as a reference, Parajuli said that local lumber producers gained about US $1.6 billion, while consumers lost about US $2.3 billion. Imports from Canada dropped about 7.7% in the months after the tariffs took hold.
“US consumers not only paid producers gains but also the losses that came from the export taxes,” he said, before adding that Germany, Sweden and other European trading partners do not have the lumber to make up for the Canadian shortfall: “Compared to the 28.1 million cubic metres of softwood lumber that Canada exported into the United States in 2023, for example, Germany and Sweden only exported a combined 3.49 million cubic metres of softwood into the US during that same time.”
Last week, Wood Central reported that Trump’s tariffs could add between $35k and $45k to the cost of a new home, which could be a near-fatal blow for the construction industry grappling with spiralling building costs. And whilst President Trump believes the United States “has all the trees you need,” to offset the loss in imports, economists and homebuilders caution that it will be far from easy to fill the gap.
First and foremost, not all wood is created equal or suitable for homebuilding, according to Robert Dietz, the chief economist for the National Association of Home Builders (NAHB), who warned that expanding an industry does not happen overnight: “At various stages of the production process, there are limiting factors,” Dietz told CNN.
“That’s not to say it’s impossible to increase a domestic industry, but it takes time. It takes policy refinements, and what we’ve often seen in the natural resource and construction sectors, it also requires tackling domestic labour shortages.”
In December, Wood Central reported that 50% of construction workers in parts of Texas and California are undocumented immigrants – making the industry one of the most exposed to Trump’s border security policies: “The industry, in any given month, is short about 300,000 workers, and similar constraints to sawmills and harvesting timber,” he said. “There’s the economic question of if you’re going to increase lumber production or any other building material in a full employment market, what other sectors are you to produce less of?”
Referencing the pandemic, where the cost of lumber skyrocketed from $350 per thousand board feet to more than $1500 per thousand board feet, Dietz said production didn’t increase that much. “Part of the reason is that, like any other industry, there’s a large amount of fixed costs.”
- To learn more about Trump’s new tariffs on the cost of lumber that is now imported from Canada, Mexico and China, click here for Wood Central’s special feature. To learn more about the North American softwood lumber dispute and its impact on the price of Spruce-Pine-Fir (SPF) and Southern Yellow Pine (SYP), click here.