Michael Mann 
CNN
—
President Donald Trump has frequently quipped that “we don’t need” products from Canada.
That includes oil, autos and, of course, lumber.
“We don’t need the products that they have,” Trump said Thursday as he signed executive orders in the Oval Office. “We have all the oil that you need. We have all the trees you need.”
While trees are bountiful in the US (we have 300 billion of them), economists and homebuilders caution that America does not currently have the industrial capacity to meet the demand and that taxing — or worse, cutting off — Canadian lumber imports could further exacerbate the ongoing housing affordability crisis.
Softwood lumber, which is sourced from the likes of pine, spruce, firs and other conifers is prized for its light weight, workability and strength.
As such, its applications are vast, but it’s a critical ingredient in the US homebuilding industry: Commonly, the skeleton and skin of homes — the framing, roof and siding — consist of softwood lumber.
Those bones could soon come at a higher cost, further exacerbating the home affordability problem. Trump just announced a 25% tariff on practically all imported goods (there was a 10% carve-out on energy imports) from Canada, where the US sources about 30% of the softwood lumber it uses annually. Trump also imposed a 25% tariff on imports from Mexico and an extra 10% on imports from China.
However, because of a decades-long strife between the two neighboring countries, the tax on softwood lumber might not stop at 25%. Those imports already are subject to countervailing and anti-dumping duties of 14.5%.
The Trump administration said Saturday that the tariffs were designed to stop the flow of undocumented immigrants and fentanyl into the US.
“Our industry relies heavily on predictability,” said Nick Erickson, senior director of housing policy for Housing First Minnesota, a trade organization that represents builders, remodelers and other businesses in the North Star State.
“Whether it’s lumber tariffs or tariffs on any other import, these can impact the supply chain,” Erickson said. “And we’ve seen in the past that tariffs on lumber, these are paid for by new homebuyers in the cost of their home.”
Exacerbating affordability challenges
Housing in the US has becoming increasingly unaffordable in recent history, as supply has lagged demand. And that demand has become increasingly heightened in recent months as hurricanes and wildfires have destroyed thousands of homes across the US.
Compounding that has been a “scarcity and an acute, sustained rise in building material costs,” according to the National Association of Home Builders.
And tariffs would further exacerbate those rising costs, the organization wrote.
Of the estimated $184 billion of goods that went into new single-family and multifamily construction in 2023, about 7%, or $13 billion, was imported, according to NAHB estimates.
Lumber, at $8.5 billion in imports, represents the lion’s share of that, according to the NAHB, which noted that 70% of those lumber imports came from Canada.
And it’s not just lumber at risk for tariffs: 71% of the imported $456 million of lime and gypsum (which are used for drywall) came from Mexico in 2023.
Factoring in the other raw materials and components imported from Canada, Mexico, as well as China (notably the steel, aluminum and home appliances already subject to tariffs), Trump’s new tariffs could raise the cost of imported construction materials by $3 billion to $4 billion, the NAHB noted.
“Which would then make housing affordability conditions more challenging,” said Robert Dietz, chief economist at the NAHB.
History has shown this to be the case.
In 2006, the US-Canada Softwood Lumber Agreement allowed Canadian provinces to collect export taxes on lumber purchased by US companies.
That agreement, which was active until 2015, resulted in softwood exports declining by nearly 8%, US lumber producers gaining $1.6 billion and US consumers losing $2.3 billion, Rajan Parajuli, an NC State associate professor of forest economics and policy, told CNN Business.
“The losers always will be the consumers with the limited benefit for the domestic producers,” Parajuli said, noting that the producers who import the materials end up passing along some of those added costs to consumers.
Expanding an industry ‘takes time’
While it is true that the US has a lot of trees (about 300 billion of them), economists and homebuilders caution that it would be far from easy for domestic wood to fill the gap.
First and foremost, not all wood is created equal nor suitable for homebuilding needs.
But perhaps most importantly, expanding an industry doesn’t happen overnight, said Dietz.
It takes regulatory approval to open a new saw mill, which is necessary to turn timber into lumber. Timber, he said, has challenges of its own as there are often harvesting limits.
Then there are regulatory requirements to develop access roads.
“At various stages of the production process, there are very limiting factors,” he said. “That’s not to say that it’s impossible to increase a domestic industry, but it takes time. It takes policy refinements, and what we’ve often seen in the natural resource and construction sectors is it also requires tackling domestic labor shortages.”
The construction industry has had an ongoing skilled labor shortage for a decade, he said.
“The industry, in any given month, is short about 300,000 workers, and similar constraints apply to sawmills and harvesting timber,” he said. “There’s the economic question of if you’re going to increase lumber production or any other kind of building material in a full employment labor market, what other sector are you going to produce less of?”
A salient example can be drawn from very recent history: When lumber prices skyrocketed amidst a pandemic home-buying boom.
The price of softwood lumber increased from roughly $350 per thousand board feet to more than $1,500 per thousand board feet, he said.
“But when we look at data items like lumber production employment in the sawmill industry, it didn’t really increase that much,” he said. “Part of the reason is that, like any other industry, there’s a large amount of fixed costs.”
Still, even in an era when tariffs loom large, and scores of pressures beset the US housing industry, some homebuilders are optimistic, especially about the potential for the Trump administration to further ease regulations.
“This housing shortage in America has really created this interesting bipartisanship (where all parties) unite on this concept of increasing housing affordability and providing regulatory relief, lifting the barriers at all levels of government for the production of needed new housing,” said Erickson, of Housing First Minnesota. “This has been going on for about two years, and it’s crescendoing.”
