U.S. Lumber Industry Poised to Challenge Canada’s Lead as Tariffs Take Effect
The southern United States is on track to surpass Canada’s longstanding dominance in the North American lumber market, as years of trade restrictions and environmental challenges take a toll on Canadian output. According to commodity pricing agency Fastmarkets, the U.S. South is poised to overtake Canada in softwood lumber capacity for the first time since at least 1970. This shift highlights how Canada’s lumber sector has weakened under U.S. tariffs, alongside issues like wildfires, land-use regulations, and insect infestations.
In August, the U.S. raised import duties on Canadian softwood lumber by nearly 81%, intensifying a four-decade trade dispute. Analysts expect the current 14.54% levy could double by next year, illustrating how trade policies can reshape industries and create new market leaders. Tariffs on imports have become a prominent election topic in the U.S., with Republican candidate Donald Trump advocating for broad import taxes. The U.S. has long claimed that Canada’s C$10 billion ($7.2 billion) industry undercuts American producers with low-cost lumber, contending that Canadian loggers’ government-set fees constitute a subsidy. This dispute has severely impacted British Columbia (BC), where forest products made up a quarter of all export value in 2022. Additional tariffs could be “quite devastating for the sector,” said Kurt Niquidet, chief economist at the BC Council of Forest Industries, noting the potential for widespread mill closures across Canada.
While Canadian sawmills, especially in BC, grapple with rising costs and diminishing revenue, the U.S. South is seeing gains in lumber production. The U.S. Lumber Coalition credits tariffs for fueling American investment and boosting production capacity. North American sawmill closures resulted in a 4% capacity reduction this year alone, with over 40% of those closures in BC, according to Fastmarkets senior economist Dustin Jalbert. Canfor Corp., a major Canadian forestry company, announced plans to shutter two BC mills by year-end, citing tariffs and limited timber supply, resulting in a C$100 million writedown. Other major Canadian producers, including West Fraser Timber Co., Interfor Corp., and Western Forest Products Inc., have also cut back or closed mills in western Canada.
The U.S. South, benefiting from faster-growing private forests, has emerged as North America’s largest wood-producing region, says Brooks Mendell, president of Forisk Consulting in Georgia. However, he noted that Canada remains essential to North America’s lumber supply, as the U.S. alone cannot meet demand. If Canada’s output continues to decline, American consumers may face higher lumber prices or turn to more distant sources, like Scandinavia. “The U.S. can only produce so much more incremental lumber before reaching a maximum harvest limit,” noted BC-based forestry consultant Russ Taylor, who has been active in the industry for over four decades.
Lumber demand is showing signs of recovery, potentially slowing Canada’s decline. U.S. single-family home construction is increasing, with the National Association of Home Builders forecasting growth through 2026. Fastmarkets expects North American lumber capacity to fall short of demand this year for the first time since the pandemic-fueled home improvement surge. “If demand recovers next year while supply is down, it doesn’t take an economist to see what that likely means for prices,” said Fastmarkets’ Jalbert.
