Canada’s $63 billion forestry industry is under pressure as U.S. tariffs and a slowing American housing market slash lumber exports and drive prices down. In August, the U.S. Department of Commerce raised combined anti-dumping and countervailing duties on Canadian softwood lumber to 35.19%, up from 14.5%. Lumber prices fell 25% from early August to mid-September before recovering by roughly 10%. In British Columbia, some sawmills report steep drops in U.S. shipments, with one operator reducing its share from 40% of output to just 10%.
According to the Forest Products Association of Canada, the sector supports 200,000 direct jobs, with two-thirds of softwood production exported, 90% of that to the U.S.
Dustin Jalbert, senior economist at Fastmarkets, told the FT that no Canadian producers are currently profitable and warned of a “major wipeout” if prices remain low. British Columbia’s Forestry Minister Ravi Parmar confirmed that mill curtailments are already underway.
The slowdown in the U.S. housing sector, one of the main buyers of Canadian softwood, is compounding the industry’s problems. U.S. housing starts in August dropped to their lowest level in nearly five years. Elevated mortgage rates, high home prices, and a weakening labor market are all weighing on builders.
Sawmills are responding by cutting production or shifting focus. Interfor, one of the world’s largest lumber firms, plans to reduce output by 12% through year-end. Domtar will idle its Maniwaki mill in Quebec beginning in October. In response, Ottawa has announced a C$1.2 billion support package for the forest sector, including C$700 million in loan guarantees. Some mills are also diversifying: B.C. operator Warren Gavronsky told the FT he has returned to making transmission poles for domestic infrastructure to reduce dependence on U.S. sales.
The U.S.–Canada lumber dispute, rooted in disagreements over stumpage fees for timber harvested on Canadian crown land, has long been a source of friction. Zoltan van Heyningen of the U.S. Lumber Coalition told the Financial Times that Canadian producers “preloaded their warehouses” and flooded the market ahead of the duties, worsening the price collapse.
The U.S. Federal Reserve this week cut its benchmark interest rate by 0.25 percentage points to a range of 4.00%–4.25% and signaled further reductions in 2025. The 30-year fixed mortgage rate has decreased to 6.26%, according to Freddie Mac. A sustained decline in borrowing costs could help revive U.S. housing demand and support lumber prices, easing pressure on Canadian producers.
