Why the US and Canada are at loggerheads over lumber

Straits Times

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Canadian PM Mark Carney during a visit to the Gorman Bros. Lumber Ltd sawmill in West Kelowna, British Columbia, on Aug 5.
The US and Canada are fighting about lumber once again.
The neighbours have feuded over softwood lumber from fast-growing coniferous trees since the 1980s. The US has periodically put in place duties to counteract what it claims are unfair subsidies and sales of lumber priced below market value.
In the first year of his second term, President Donald Trump is escalating the fight.
In March, Mr Trump signed an
executive order to increase US lumber production by streamlining permitting and ordered the Commerce Department to investigate the national security harm of lumber imports.
With the industry under deepening pressure, on Aug 5, Canadian Prime Minister Mark Carney promised Canadian sawmills as much as C$1.2 billion (S$1.12 billion) in loan guarantees and grants. Three days later, the Commerce Department separately confirmed an increase in duties on Canadian softwood lumber from 14.4 per cent to 35.19 per cent based on a review of the 2023 calendar year, effective immediately.
Canada has long resisted changing its trade practices on lumber. But as the Trump administration has become more bellicose about its trade relationship with Canada, the country's stance may be softening.
On July 16, British Columbia Premier David Eby told Bloomberg News that Canadian officials are now open to putting a quota on the amount of softwood lumber exported to the US.
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The increased fees from the US will likely further hamper an already struggling Canadian industry and benefit foresters in the US South, where production has already grown in recent years. But the US would likely struggle to offset the lumber it gets from Canada in the short-term, potentially driving up housing prices.
Here is what to know about the commodity that has long dominated US-Canada trade tensions.
What is softwood lumber?
Softwood lumber comes from evergreen trees such as pine, as opposed to hardwood lumber, which comes from leafy trees like oak. Softwood is typically used in home construction because evergreen trees grow faster and typically produce wood that is less dense, making it both cheaper and easier to work with on a large scale than hardwood.
Outside of Canada, North America's largest evergreen forests are largely located in the US South. The US used nearly 50 billion board feet of softwood lumber in 2024, relying on Canada for about 24 per cent of that supply, according to Fastmarkets.
A board foot refers to a square of lumber that is one foot (0.3m) wide and long, with a one-inch (2.54cm) thickness.
What is the softwood lumber dispute over?
The US has long accused Canada of subsidising its lumber production to lower prices and then dumping the goods into the US.
At the heart of the matter are the so-called 'stumpage rates' that sawmills pay to Canadian provincial governments to harvest timber in government-owned forests.
The US says those fees are below market rates and are equivalent to a government subsidy, and has at times put in place its own anti-dumping and countervailing duties to counterbalance them. Canada denies that it sets low stumpage rates to undercut the market.
The latest round in the dispute began in 2016, after a US-Canada lumber agreement signed about a decade prior lapsed. The two countries came close to agreeing to cap Canada's share of the US lumber market at 30 per cent, but could not settle on what would happen if US loggers were not able to fulfil their share.
The US lumber industry filed a petition to re-impose high fees on Canadian exports, and the Commerce Department in 2017 announced combined countervailing and anti-dumping duties of 20.8 per cent.
The World Trade Organization in 2020 largely backed Canada's claim that the US's levies were unfair. The fees, which are re-evaluated every year, now total 35.19 per cent.
Mr Carney's latest pledge of financial support could deepen the dispute, potentially leading to yet higher US duties in the future.
The US Lumber Coalition said it will ask the Commerce Department to look at whether Canadian companies 'received a distortive benefit' from the aid.
How is Trump escalating the dispute?
On Aug 8, the US Department of Commerce confirmed it would more than double combined anti-dumping and countervailing duties on Canadian softwood lumber to 35.19 per cent, and the department's investigation into the potential national security harms of foreign lumber shipments could lead to further import restrictions.
The ongoing probe is under Section 232 of the Trade Expansion Act, which Mr Trump has already used to place tariffs on metals such as steel, aluminium
and copper .
Mr Trump has yet to outline specific demands for how he wants Canada to change its practices in the lumber trade.
The duties put in place during Trump's first administration and the US South's naturally faster-growing private forests have made American lumber more lucrative in recent years. The US South overtook Canada in 2024 as the largest producer of North American lumber, according to Fastmarkets.
Mr Eby, the British Columbia Premier, told Bloomberg that a quota deal between the countries would give the US access to affordable building materials while securing jobs for Canadian workers. But it is still unclear how the US government would respond to such a proposal.
Can the US just product more lumber instead of importing it?
The US has large swaths of unexploited forests, and Mr Trump committed to expanding domestic timber production in his March executive order that directed federal agencies to streamline permitting and reduce regulatory limits.
The US has 'more than adequate' resources to meet 'timber production needs, but heavy-handed Federal policies have prevented full utilisation of these resources and made us reliant on foreign producers,' Mr Trump said in the order.
To comply with that directive, Agriculture Secretary Brooke Rollins in April placed nearly 45.7 million hectares – 59 per cent of all federally managed forest – under an emergency determination aimed at giving the government more latitude to increase timber production and fight wildfires.
The USDA in late May also committed US$200 million (S$255.9 million) toward its plan to boost timber production.
However, though the US has some spare capacity to turn more timber into construction materials, a fully domestic supply chain would likely still require the construction of new sawmills and additional trained workers to operate the facilities – needs complicated by an immigration crackdown – which would slow the transition from foreign lumber.
Another factor for US suppliers and buyers is that US and Canadian lumber are not a perfect swap. The southern yellow pine species, which has accounted for much of the US industry's expansion, grows faster than Canada's spruce pine fir.
But the spruce pine has long been favoured because it is easier to work with and reacts less to changes in moisture. As of Aug 13, futures prices for spruce pine fir were trading at a premium of about US$210 per 1,000 board feet (2.35 cubic m) over southern yellow pine lumber.
What does the escalating trade war mean for housing prices?
Though lumber accounts for less than 20 per cent of building costs, the National Association of Homebuilders has long said that restrictions on Canadian lumber translate to higher construction costs.
In 2018, after duties on Canadian lumber were put back in place, many homebuilders resorted to using cheaper southern yellow pine, building smaller homes and changing designs to use fewer materials. BLOOMBERG