We embarked on a big remodeling project in early 2021, just as lumber prices soared to all-time highs. Suddenly, 2x4s were selling for $16, when just a year before they were less than $4. Luckily we only needed a handful of them, but had we been building a whole house, it would have raised the costs so much that we would have had to scrap the whole project.

Now that a 25% tariff on lumber from Canada is looming, will this cause crazy wood pricing to return? To some extent, that is very probable, and here’s why.

Where Does the US Get Its Lumber?

In 2024, our country got about 72% of its lumber from its own forests. The rest was imported from various countries, especially Canada, from which we purchased 28.1 million cubic meters last year.

According to the US Department of Commerce, Canada accounts for 84.3% of all softwood lumber imports, followed by Germany (6.1%), Sweden (2.8%) and Brazil (1.4%).

Why Does the US Get So Much Of Its Lumber From Canada?

We rely on lumber from Canada because the U.S. cannot supply enough softwood to meet its own demand, and Canada is one of the largest softwood producers in the world.

While it might be possible to switch to importing more lumber from other countries, none has Canada’s large production capacity. Also, supply chains — especially for lumber — are complex and costly to change, says Frederik Laleicke, an assistant professor and wood products extension specialist at NC State University.

“Because Canada directly borders the US, it is an integral part of the North American construction material market,” he says. “Looking at the history of dimension lumber, the industry has developed extremely efficient logistics for moving logs from forests to construction sites, including harvesting, processing and transportation.”

How Will Tariffs On Canada Impact Lumber Cost?

Lumber in lumberyard warehouseOnurdongel/Getty Images

As long as demand for lumber doesn’t drop, a 25% tariff on Canada will likely make lumber—and therefore new houses and renovations—more expensive since US companies will raise the price of Canadian-sourced lumber to compensate for the tariffs.

“We saw something similar to these price troubles during the COVID-19 pandemic, during which the supply of softwood lumber declined rapidly while demand remained high,” says Laleicke. “That made softwood prices rise for a while, and it wasn’t until after the supply grew again that prices dropped significantly.”

While proponents of the tariffs say tariffs will encourage US companies to invest in local production, economists warn that even if that happens, lumber prices will rise. For example, North Carolina University’s College of Natural Resources cites the 2006 US-Canada Softwood Lumber Agreement, which allowed Canadian provinces to add tariffs to their US exports. While that agreement was in effect (until 2015), us production did rise, while the US’s import of Canadian softwood lumber dropped by nearly 8%. But, the savings didn’t go to the builders and homebuyers. Instead, US producers gained $1.6 billion, while US consumers paid out an extra $2.3 billion for the deal.

How Will Tariffs On Canada Impact Housing Costs?

Most of the softwood lumber we get from Canada is used in residential and commercial construction — and in 2023, 93% of new residential homes used softwood as the primary building material — so tariffs on Canadian lumber would especially impact the cost of new homes. According to the National Association of Home Builders (NAHB), probably to the tune of 15%. In turn, that will ripple through housing market, also raising the cost of existing home sales and rentals.

“Over the past few years, new home prices have already skyrocketed in many markets due to factors beyond just the cost of lumber, making homeownership increasingly unaffordable for Millennials and Gen Z,” says Laleicke.

About the Expert

  • Frederik Laleicke is an assistant professor and wood products extension specialist at NC State University. He also teaches workshops about the processing of wood, and regularly visits sawmills and wood products companies in North Carolina and beyond.

Sources

 https://www.familyhandyman.com/article/why-does-us-get-lumber-from-canada/