US–Canada trade conflict deepens longstanding divides as bordering states bear the brunt.
North–South flow of softwood lumber, pulp and other wood products continues to decline as the US–Canada trade dispute persists. While Canadian forestry representatives hope to return to negotiations to preserve highly integrated cross-border markets, their American counterparts favor protectionist tariffs with key exceptions.
Canadian softwood lumber currently faces a 10% Section 232 global tariff with company-specific anti-dumping and countervailing duties ranging from just under 21% to 35%, for combined rates of 31% to 45% depending on the producer.
Maine’s Governor Janet Mills has criticized the US tariffs for leading to the temporary layoff of 144 workers at one mill which traditionally received pulp from New Brunswick, and the canceled redevelopment of another former mill that would have created 125 new jobs.
Builders in Massachusetts and other northern states have lamented the steeper costs of materials for housing, custom cabinetry and other purposes. In Ohio, the levies have contributed to record-high pricing for homes in metropolitan areas, such as Columbus.
The council maintains the US industry can efficiently supply these markets in relatively little time, after better communication with builders, and additional government support. Dane says the $80 million in loan guarantees announced by the US Department of Agriculture in July to expand domestic timber production and improve forest health is a start but insufficient. He notes the Canadian government’s $2.5 billion commitment to retool and transform its forestry and softwood lumber sectors.
“The US government needs to invest more in its domestic timber industry to remain competitive,” Dane says. “Reducing import volumes from Canada, Brazil and Europe will also help.”
Canadian softwood lumber entering the US over the past 12 months has declined from 28% to 18%. “And there’s been no appreciable change in the cost of lumber,” Dane adds.
Derek Nighbor, president and CEO of the Forest Products Association of Canada (FPA), says impacts are significant where near-border industries have become integrated supply chains. “The trade war has thrown all this into chaos, creating losers on both sides,” he emphasizes.
Homebuilders for years have embraced the affordable prices, extensive availability, and quality of Canada’s spruce pine and fir whose colder growing cycles make the fibres more pliable and less prone to warping – making them ideal for house framing.
The association has seen a 12% decline in Canadian volumes going into the US earlier this year compared to last, but most of that has been replaced with Swedish, Austrian and German imports. “Northern wood is still what’s in demand,” Nighbor says. “And Europeans are being favored with flat 15% duties.”
Either way, Americans are paying more. Bill Owens, chairman of the National Association of Home Builder (NAHB), has noted the impacts. “Building material tariffs heighten market uncertainty, strain supply chains and increase construction costs,” he says. “As the [US] president continues to advance his tariff agenda, NAHB is urging the administration to exempt building materials in light of the ongoing housing affordability crisis.”
Nighbor says no one has an issue with the US strengthening domestic manufacturing but says it shouldn’t be at the detriment of successfully integrated supply chains. “My hope for the industry on both sides is that we get back to talking about a stronger North American economic powerhouse, because we’re both facing big issues as a continent,” he says.
Shared issues include more challenging forest fire management, soft overall wood-product markets, and declining pulp demand. “Pulp mills going offline is bad news for the sawmill operators who sell their chips to them,” Nighbor notes.
Opportunity exists for both sides of the border, Nighbor insists, if focus is placed on encouraging more building with wood, rather than allowing steel or cement to assume that business. He also says the North American market should prepare for when European producers may redirect supplies to rebuild in Ukraine and the Middle East.
Stumped by Stumpage
A core trade issue remains stumpage rates. In the US, where almost 60% of forests are privately owned, prices are determined by competitively open markets that promptly respond to market demand. In Canada, where upwards of 90% of forested land is publicly owned, each province/territory has its own formula for establishing stumpage rates. The formulas are based on residual value – factors that include the type/quality of wood, forest management costs, road building requirements, and harvesting expenses – along with recent market averages. These rates are reviewed monthly in some cases, quarterly in others. The US side contends the slower market adjustment give Canadian producers the advantage prices spike. Canadian producers counterargue that fees align with market trends, noting that previous rulings under the North American Free Trade Agreement (NAFTA) and World Trade Organization (WTO) determined that Canadian softwood lumber isn’t unfairly subsidized.
Even if Canada were to change how it determines stumpage rates, the American industry wants most imports to cease. “The Pacific Northwest and the Northern states can just as well produce the spruce pine fir that’s grown in Canada,” Dane maintains. “And Georgia pine is gaining traction within the housing industry.”
The council doesn’t envision welcoming imported dimensional lumber unless US housing starts skyrocket. “A game-changer would be if mortgage interest rates went back down to 3%,” Dane says.
Dane notes that most US lumber mills are operating at three-quarters capacity and could easily ramp up production, especially with the president’s executive order in March increasing domestic timber harvesting across 280 million acres of national forests and public lands. The planned expansion has been met with strong opposition from wildland firefighters, scientists, clean-water advocates, conservationists, as well as millions of US citizens and could become an electoral issue. Dane counters that recent forest fires have been intensified by an overabundance of natural biofuel arising from insufficient harvesting.
Pulp Demand Down
Declining new pulp demand is a continental issue. “Like Canada, the US has had a rash of mill closures, including some dimensional lumber, but mainly pulp and paper,” Dane says. “You cannot productively run lumber mills without having a market for pulpwood,” Dane explains.
In the US, last year’s recycling rates for paper and cardboard remained steady at 61-65% and 70-75% respectively, according to the American Forest and Paper Association (AFPA). Dane says companies still using new pulp are importing it at lower prices from Canada or Brazil.
In Canada, the overall recovery or recycling rate for general paper and cardboard products is approximately 70%. Pulp mills have closed or idled across the country. For example, while Ontario historically counted upwards of 20 pulp-and-paper mills, it’s down to three.
The industry in both countries is dealing with the challenges of aging equipment and a lack of newly integrated technologies. “That’s where new mills in Brazil are gaining advantage,” Dane says.
Anger has grown in Canada about prominent mills closing or idling operations shortly after receiving provincial and/or federal support to expand or maintain operations. At least 21 mills have closed in British Columbia alone since 2023.
In the US, at least 31 wood-using pulp mills have closed since 2019. Dane accuses some corporations of running operations into the ground to have the excuse to shut down. He says investment and innovation is coming instead from private enterprises, such as RoyalOMartin. “I recently toured one of their impressively modern and efficient mills in Louisiana,” he says.
A much greater use of forested biomass as a renewable energy source is viewed on both sides of the border as a viable alternative use for low-value timber and wood chips. “The development of biofuel, biochar and other forest-based biomass-developed products would go a long way in filling the loss of pulpwood markets,” Dane notes.
The council has made it a top legislative agenda to have market development support include forested biomass feedstocks in US renewable fuel standards. In Canada, provincial/territorial forestry organizations are similarly prioritizing biomass energy in their pivoting strategies.
