The Trump administration has taken significant steps to reshape the United States' trade relations with Canada by imposing tariffs on Canadian lumber imports. President Donald Trump, during recent executive orders signed at the Oval Office, remarked, "We don’t need the products from Canada. We have all the oil you need. We have all the trees you need." This declaration underpins the rationale behind the newly established 25% tariff on softwood lumber, which comprises about 30% of the lumber used annually for American homes.
The tariffs come at a time when housing affordability has reached crisis levels across the United States. This affordability crisis is compounded by rising demand resulting from natural disasters like hurricanes and wildfires, which have destroyed thousands of homes. Nick Erickson, senior director of housing policy for Housing First Minnesota, stated, "Our industry relies heavily on predictability. Whether it’s lumber tariffs or tariffs on any other import, these can impact the supply chain.” He adds emphasis to how these tariffs invariably increase costs for new homebuyers.
The introduction of tariffs on lumber could escalate already soaring construction costs. The National Association of Home Builders (NAHB) has expressed concern over the significant share of softwood lumber imported, noting the role it plays as the backbone of home construction—used extensively for framing, roofing, and siding. According to NAHB estimates, out of approximately $184 billion worth of goods contributing to new single-family and multifamily construction this year, around $13 billion comprises imported materials, with lumber (valued at approximately $8.5 billion) accounting for the lion’s share of imports.
History has shown the volatile nature of lumber tariffs. The previous Softwood Lumber Agreement between the U.S. and Canada limited trade flows significantly, which saw U.S. lumber producers gain from tariffs at the expense of consumers, who faced higher prices. Rajan Parajuli, a professor of forest economics and policy at North Carolina State University noted, "The losers always will be the consumers with the limited benefit for the domestic producers." His remarks highlight the potential pitfalls of restricting imported lumber—historical patterns suggest it leads to inflated costs for American buyers rather than bolstering the domestic industry.
Despite arguments asserting the U.S. can compensate for the loss of lumber imports with domestic production, experts caution against oversimplification. There are substantial barriers to scaling up domestic lumber production capacity. Robert Dietz, chief economist at NAHB, explained, "Expanding the industry takes time. There are regulatory approvals required to open new sawmills, which convert timber to lumber, and harvesting limits pose additional challenges.” He elaborates on the systemic labor shortages the sector faces, with hundreds of thousands of positions remaining unfilled, affecting sawmills and the timber industry alike.
The lumber pricing instability was starkly illustrated during the pandemic when prices surged dramatically. Reports detailed how the price of softwood lumber skyrocketed from around $350 to over $1,500 per thousand board feet, underscoring the fragility of the housing materials market. Even as production remained relatively steady, the associated costs rose significantly.
While the deluge of tariffs and their repercussions paint a bleak picture for housing affordability, some researchers and industry leaders express cautious optimism. Erickson pointed out, "This housing shortage in America has really created this interesting bipartisanship... on this concept of increasing housing affordability." This sentiment reflects growing unity among stakeholders across political lines, as pressure mounts to diminish barriers to new housing construction.
The future remains uncertain, and with tariffs likely driving up costs significantly, maintaining housing affordability will require careful navigation through both political and economic landscapes. Homebuilders are hopeful for easing regulations and innovative policy solutions to mitigate the challenges presented by tariffs and the overall housing crisis.