By Mrinalika Roy and Seher Dareen
(Reuters) – U.S. President Donald Trump’s tariff threat could motivate more Canadian lumber producers to shift to the U.S. southern border while accelerating efforts to find new markets, industry experts said.
The levies are the latest in a nearly four-decade dispute between the neighbors over softwood lumber, used in construction, furniture and paper production.
Levies on Canadian lumber could hit 40% if current duties of 14.54%, and Trump’s proposed 25% tariffs are added. Trump has paused tariffs on goods compliant with the United States-Mexico-Canada Agreement until April 2.
Washington has alleged that Canadian lumber products were subsidized and sold in the U.S. below fair market value. Canada has successfully challenged such duties under the dispute resolution provisions of multilateral trade agreements.
Canada supplies about a quarter of U.S. lumber, and over the past decade, several Canadian mills have moved their operations to the U.S. South, drawn by cheaper, abundant timber and its availability on private lands as opposed to Crown land, which employs stringent harvesting policies.
“Disparity in log costs and availability are the major drivers here, but Canadian investment in the region has certainly been partially motivated to moving operations where they avoid the impact of duties,” said Dustin Jalbert, senior economist, wood products, at commodity pricing agency FastMarkets.
Canfor, for instance, has been shuttering operations in British Columbia, citing challenges accessing economical fibre, losses, weak markets and U.S. tariffs.
About 70% of Canfor’s lumber business is now outside Canada, while 80% of peer Weyerhaeuser’s lumber manufacturing is now in the U.S., they said in their latest quarterly earnings calls.
Canfor, Weyerhaeuser and several Canadian companies declined to comment for this story.
“In 2004, there were only two sawmills owned by a Canadian manufacturer. Today, we have more than 50,” said Kyle Little, chief operating officer at New York-based Sherwood Lumber, which supplies over 2,000 U.S. lumber yards and manufacturers.
“Canadian companies now produce more than a third of the volume of the largest producing region in the U.S. – the U.S. South.”
The U.S. South surpassed Canada in softwood lumber capacity in 2022 and will continue to expand this decade, FastMarkets said.
British Columbia’s dwindling output, which has halved since 2017, is dragging Canada’s market share.
“For years, producers have opted to open mills in the U.S. South due to challenges in Canada,” and the tariffs could expedite this, said Morningstar analyst Spencer Liberman.
