Tariffs on Canadian Lumber Deepen North America’s Housing Divide
When President Donald Trump imposed a new 10 percent tariff on Canadian softwood lumber—on top of existing duties that in some cases already exceeded 35 percent—the move was framed as a defense of American industry. In practice, it has intensified a continental supply shock that is reverberating through construction sites, mortgage markets and government budgets on both sides of the border.
The latest increase means some Canadian producers now face combined tariff rates approaching or exceeding 45 percent when shipping into the United States. Companies like West Fraser Timber and Canfor have seen sharply different duty levels applied to their exports, reflecting long-running trade disputes over pricing practices and subsidies. What had once been a predictable cross-border supply chain is now strained by costs that fundamentally alter where lumber flows—and at what price.
For decades, Canadian forests supplied a substantial portion of the framing lumber used in American homes. The United States consumes roughly 70 billion board feet of lumber annually but produces closer to 58 billion, leaving a structural shortfall typically filled by imports, primarily from Canada. That gap has become far more expensive to bridge.
In the short term, American mills benefit from reduced foreign competition and firmer pricing. But the broader housing market tells a more complicated story. According to Zillow, the United States faces a housing shortage of roughly 4.5 million homes, a deficit that has grown despite years of elevated construction activity. The National Association of Home Builders has warned that higher material costs—particularly lumber—add thousands of dollars to the price of a typical new home.
Lumber accounts for an estimated 15 to 25 percent of the cost of constructing and finishing a single-family house. When composite framing lumber prices rise into the $800-per-thousand-board-feet range, as they have at times over the past year, builders feel the impact almost immediately. Even if prices settle in the mid-$500s or $600s, that remains well above pre-pandemic norms.
Industry groups estimate that recent tariffs could add roughly $6,000 to the cost of a newly built home. In markets where affordability is already stretched, such increases can determine whether a family qualifies for a mortgage. Lower interest rates provide partial relief, but financing costs cannot offset sustained material inflation. As entry-level buyers are priced out, housing starts soften, even as the shortage persists.
Canada, for its part, has responded not with capitulation but with restructuring.
Prime Minister Mark Carney unveiled a $5 billion strategy designed to reduce Canada’s reliance on the American market. Central to the plan is a “Buy Canada” procurement mandate requiring federal agencies and Crown corporations to prioritize domestic lumber for publicly funded projects. That policy effectively guarantees demand from infrastructure, public housing and government construction, insulating Canadian mills from some of the volatility created by U.S. tariffs.
The federal government has also expanded financing through the Business Development Bank of Canada, offering loans to small and midsize lumber firms affected by American duties. Provincial governments in British Columbia, Ontario and the Prairie provinces have introduced complementary support programs, funding modernization efforts and cushioning job losses in forest-dependent communities.
The transition has not been painless. More than 20 mills have closed permanently, and thousands of workers have lost jobs. Yet some companies have used the disruption to consolidate production into more efficient facilities. By pairing modernization with guaranteed domestic procurement, Ottawa is attempting to build a more resilient industry less exposed to American political cycles.
Trade flows are already shifting. British Columbia, historically a major supplier to Washington, Oregon and California, has begun redirecting a portion of exports to the United Kingdom and parts of Asia. European markets, constrained by reduced Russian supply and environmental limits, have shown interest in diversifying timber sources. Japan and South Korea, though requiring specific grading standards, represent additional growth opportunities.
Once these relationships are established and supply chains recalibrated, they may prove difficult to unwind. Even if tariffs were reduced in the future, Canadian producers could find that alternative markets—free of punitive duties—offer more stable returns.
For the United States, the arithmetic remains stubborn. Domestic production cannot easily scale up to close a 12-billion-board-foot gap. Expanding sawmill capacity requires capital, labor and time, none of which materialize overnight. Meanwhile, each year of underbuilding compounds the housing deficit, pushing ownership further out of reach for younger households and increasing pressure on rental markets.
Treasury Secretary Scott Bessent has acknowledged the severity of the housing challenge, raising the possibility of extraordinary federal measures. But emergency declarations do little to resolve material bottlenecks. Stable, reasonably priced inputs remain essential to sustained homebuilding at scale.
The lumber dispute illustrates how trade policy aimed at a narrow sector can ripple outward into broader economic terrain. Tariffs designed to protect American producers have accelerated a Canadian pivot toward domestic self-sufficiency and global diversification. In doing so, they have reshaped leverage within a market that once functioned with relative predictability.
For American builders reviewing cost sheets and families calculating mortgage payments, the consequences are immediate and tangible. For policymakers in Washington and Ottawa, the stakes extend beyond quarterly earnings or political messaging. They touch the fundamental question of how two deeply integrated economies manage shared supply chains in an era of rising protectionism.
Whether tariffs endure or are eventually reconsidered, the North American lumber market may not return to its previous equilibrium. The flows that once crossed the border almost automatically now move through a landscape redefined by policy, cost and strategic recalibration.
