U.S. Plans Major Hike in Canadian Softwood Lumber Tariffs Amid Ongoing Trade Dispute

Key Takeaways:

• U.S. Tariffs on Canadian Lumber Set to More Than Double
  The U.S. government plans to raise duties on Canadian softwood lumber from 14.5% to 34.5%, citing unfair trade practices. This move is expected to impact both Canadian exporters and U.S. housing costs, as Canada supplies a significant portion of U.S. lumber imports.

• Domestic Lumber Production to Increase, But Slowly
  In response to supply concerns, the U.S. is aiming to boost timber output from federal lands by 25%. However, due to logistical and infrastructure challenges, it may take years before these efforts significantly affect the market or ease supply constraints.

The United States government is preparing to significantly raise tariffs on Canadian softwood lumber imports, further intensifying a long-standing trade dispute between the two nations. As part of an annual administrative review, the U.S. Department of Commerce has proposed increasing existing duties from approximately 14.5% to 34.5%. The updated rates are expected to take effect later this year following a final review.

These duties stem from longstanding claims by U.S. lumber producers that Canadian lumber benefits from unfair subsidies. Most Canadian forests are publicly owned and managed by provincial governments, which set stumpage fees—the prices companies pay to harvest timber. U.S. industry groups argue that these government-set rates amount to subsidies that allow Canadian producers to undercut their American counterparts on price.

Andrew Miller, chair of the U.S. Lumber Coalition and owner of Stimson Lumber, stated that Canadian practices cause "egregious harm" to U.S. producers and contribute to job losses and reduced mill operations across the country.

In response, Canadian officials and industry leaders have expressed disappointment and concern. British Columbia Premier David Eby labeled the tariffs “unjustified,” arguing they will raise housing costs for American consumers, a point echoed by Ontario's ministers of forestry and economic development. They contend that the measures could negatively affect jobs and economic growth on both sides of the border.

"The tariff hike is expected to ripple across the housing market, potentially driving up construction costs and deepening affordability challenges for American homebuyers."

Approximately 30% of the softwood lumber used in the U.S. is imported, with Canada providing over 80% of that share. Homebuilders have warned that increased duties could significantly raise home construction costs. The National Association of Home Builders (NAHB) estimates that tariffs on Canadian lumber and other essential building materials could increase the price of a new home by more than $9,000.

Simultaneously, the U.S. government is working to boost domestic lumber production. An executive order signed by President Donald Trump earlier this year calls for a 25% increase in timber harvested from federally managed lands. The directive also instructs the U.S. Forest Service to simplify permitting processes and reduce regulatory burdens to ensure a more stable domestic supply. While industry representatives welcome this move, they acknowledge that it may take considerable time before increased production affects the market due to logistical and operational constraints.

Further complicating the trade relationship, the White House has ordered a national security investigation into timber and lumber imports, which could result in additional tariffs beyond the current increases. NAHB and other stakeholders have urged the administration to avoid further action, emphasizing the importance of housing affordability and the interconnectedness of North American supply chains.

The Canada-U.S. softwood lumber dispute has persisted for more than 25 years, marked by intermittent agreements and recurring tensions. With the latest developments, the issue once again looms large in the economic and political relationship between the neighboring countries.