North American lumber market prepares for new tariffs from Trump administration

The North American lumber industry is facing a complex challenge as it navigates through closures of capacity, increases in Canadian tariffs, and the looming threat of additional Section 232 tariffs. These factors are converging to create a highly disruptive trade environment, reminiscent of historical trade disputes like the Smoot-Hawley era. Meanwhile, the industry is also grappling with a shift in demand post-pandemic, with consumption still below pre-COVID levels.

Dustin Jalbert, a senior economist specializing in wood products at Fastmarkets, emphasized the gravity of the situation during a presentation at the 2025 Montreal Wood Convention. He highlighted the potential cancellation of decades’ worth of tariff reductions due to the current environment, stating, “Even if the most extreme tariff scenarios don’t materialize, the industry cost curve is fundamentally shifting.”

There is a significant downside risk if the broader economy enters a major recession coupled with high mortgage rates. Unlike past downturns where monetary policy could stimulate housing demand, ongoing retaliatory measures from trading partners could keep bond yields elevated. This doomsday scenario of demand destruction and high mortgage rates would add another layer of difficulty for the industry to navigate through.

Capacity rationalization has been a key theme in the North American lumber industry, with approximately 5 billion board feet (BBF) of sawmill closures occurring between 2023-2024. These closures have predominantly affected British Columbia in 2023 and spread to other regions like the Pacific Northwest and the U.S. South in 2024. British Columbia’s production has significantly decreased from 13 BBF to around 7 BBF annually due to various factors such as the mountain pine beetle epidemic, habitat protection policies, and U.S. duties.

In 2024, North America saw a net reduction in operable sawmill capacity for the first time since 2020, despite expansion in the U.S. South. Fastmarkets predicts this trend of capacity decline will continue into 2025 and 2026 as the industry adjusts to these changes.

The imminent threat of “Trump Tariffs 2.0” introduces a host of challenges for the industry, including increased duties through Administrative Review 6 (AR6) on Canadian lumber and the Section 232 National Security Investigation. These tariffs could fundamentally reshape supply patterns in North America. The combined rate of countervailing and anti-dumping duties on Canadian lumber is expected to rise to around 34.45% by summer 2025. Additionally, the Section 232 investigation could lead to the implementation of 25% tariffs by the second quarter of 2025.

Overall, the North American lumber industry is facing a period of uncertainty and disruption as it grapples with capacity closures, rising tariffs, and shifting demand dynamics. It remains to be seen how industry participants will adapt to this challenging trade environment.