Canada’s Lumber Gambit Locks the U.S. Housing Market Into a Costly Future

Ottawa’s $5 billion strategy to break dependence on U.S. buyers is reshaping global lumber flows — and deepening America’s housing crisis.

When Canada announced a $5 billion plan to restructure its lumber industry away from reliance on the United States, the move barely registered in Washington. It should have. What Ottawa framed as an industrial stabilization effort has since evolved into a structural shock for the U.S. housing market — one that economists now warn could keep construction costs elevated for years.

The trigger was trade. President Trump’s administration imposed tariffs ranging from roughly 35 to nearly 48 percent on Canadian softwood lumber, betting that higher duties would force Canadian mills to concede ground to American producers. Instead, Canada responded with an aggressive industrial policy that effectively removed a critical supply artery from the U.S. housing ecosystem.

At the center of the response is a “Buy Canada” mandate. Federal agencies, Crown corporations and government-backed infrastructure projects are now required to prioritize Canadian lumber, even if cheaper alternatives exist abroad. For Canadian mills battered by tariffs, this guaranteed domestic demand came with stable prices and subsidized financing. For U.S. homebuilders, it meant something else entirely: the disappearance of the single largest external source of lumber they had relied on for decades.

The timing could hardly be worse. The United States is already short an estimated 4.5 million homes, according to Zillow and the National Association of Home Builders. Construction starts are falling, not rising, as builders struggle with higher financing and material costs. Lumber alone accounts for roughly 15 to 25 percent of the cost of building and finishing a home. When prices spike, affordability collapses.

They have spiked sharply. Framing lumber prices in the United States recently surged past $800 per thousand board feet, far above the levels builders consider sustainable. Analysts expect prices to settle in the mid-$500s to low-$600s range next year — still structurally higher than the pre-tariff norm. The reason is not a sudden boom in demand, but a permanent change in supply.

Before tariffs, the United States imported roughly 12 billion board feet of Canadian lumber annually. Domestic mills, despite capacity expansions in recent years, produce about 58 billion board feet against total U.S. consumption of roughly 70 billion. Without Canada, the math simply does not work.

Canada’s strategy ensures it will not work anytime soon. In addition to procurement mandates, Ottawa expanded low-interest loan programs through the Business Development Bank of Canada, increased regional support funds, and coordinated provincial investments across British Columbia, Ontario and the Prairie provinces. The result is an industry cushioned through the tariff shock and incentivized to pivot away from U.S. buyers permanently.

Some pain was unavoidable. Twenty-two Canadian mills closed, and more than 5,600 workers were laid off. But the survivors emerged leaner, better capitalized and protected by policy. Crucially, the cost of restructuring is now being recouped through higher domestic prices paid by a captive buyer: the Canadian government itself. That dynamic makes exporting to the United States unattractive even if tariffs were lifted tomorrow.

British Columbia, long the backbone of Canada’s softwood exports to the U.S. West Coast, has accelerated a global pivot. Shipments are being redirected to Europe and Asia, including the United Kingdom, Japan and South Korea. For European buyers seeking alternatives to Russian timber and constrained Scandinavian supply, Canadian lumber offers diversification — even at higher prices that reflect transatlantic shipping. Once those supply chains are established, industry analysts say, they tend to stick.

For American housing, the consequences are severe. The National Association of Home Builders previously estimated that tariffs on Canadian lumber would add about $6,000 to the cost of a typical new home. That estimate assumed temporary disruption. Instead, builders now face a structurally tighter market where elevated prices are the baseline, not the exception.

Treasury Secretary Scott Bessent has floated the idea of declaring a national housing emergency. The logic is stark. The United States needs to build roughly two million homes a year for a decade to close the existing gap. Current forecasts hover closer to 1.2 to 1.3 million. Lower mortgage rates help demand at the margin, but they cannot solve a supply problem rooted in material costs.

There is an irony here that neither side seems eager to acknowledge. Tariffs designed to protect American lumber producers have boosted their margins but shrunk the market they were meant to serve. Builders cannot build at scale, housing starts decline, and the shortage deepens. Canada, meanwhile, has traded short-term disruption for long-term leverage: a protected domestic market, diversified exports and freedom from a customer it now views as unreliable.

The endgame is becoming clearer. Canadian lumber that once flowed south as a matter of routine is not coming back. U.S. construction costs remain elevated. Housing affordability erodes further. What began as a trade dispute has hardened into a structural divide — one with consequences that will be felt not just in commodity markets, but in the everyday lives of American families trying, and increasingly failing, to buy a home.