The mere threat of tariffs being tacked onto Canadian lumber imports in the U.S. is raising fears of panic buying that could roil lumber markets and prices.
“A number of Canadian lumber companies are now advising customers that they will add 25 per cent to lumber exports to the U.S. when the tariff is announced,” global wood analyst Russ Taylor wrote in a recent newsletter.
“With Canadian mills already paying an average of 14.4 per cent import duties on U.S. shipments, they have no alternative but to increase prices by the 25 per cent to cover the potential tariff.”
Taylor cites Nic Wilson, CEO of the Denver Group Mass Timber Summit in the U.S., who wrote in a LinkedIn post that Canadian companies like West Fraser Timber (TSX:WFG) have sent letters to customers warning that it will hike its prices 25 per cent.
Wilson writes in his post that “multiple big Canadian mills sent out the same public announcement,” and that the potential threat of a 25 per cent increase in lumber prices could prompt “panic buying” as American buyers try to bolster February and March inventories ahead of price hikes and tariffs taking effect.
In an email to BIV, a spokesperson for West Fraser said: “West Fraser has not issued blanket emails to customers regarding potential Trump tariffs.”
Reached by phone, Wilson told BIV that he had not seen the letter himself, but had heard from other mills in the U.S. that they have received letters from Canadian lumber producers warning of 25 per cent price increases.
“I talked to sawmills first-hand that said that that’s what they received,” Wilson told BIV.
Whether the warning letters are real or rumour, it underscores the uncertainty roiling lumber markets as a result of Trump’s tariff threats.
Canadian softwood lumber producers already pay duties on lumber exports to the U.S. that average 14.4 per cent. An additional 25 per cent tariff would not stop lumber from being sold into the U.s. -- it would just raise the price for American buyers.
There could be some "panic buying" as American buyers try to build February and March inventories at current prices in anticipation of a 25 per cent price spike, Wilson writes in his post.
“Legitimately people are gambling right now, rolling the dice because some of them have been caught with their pants down, leaving their lumber in the sawmills yard too long,” Wilson wrote in his LinkedIn post.
“Now people are forced to panic ship, based on a 'what if' scenario. The crazy part is, we do not actually know if Trump will or will not add the tariff.”
Last week, the president-elect said the U.S. does not need Canadian lumber.
“Obviously, this makes no sense and it's stupid to say,” Wilson wrote. “We require Canadian lumber partnerships for the U.S. / Canadian lumber industry to keep running smoothly.”
Taylor noted that, in 2024, Canada softwood lumber imports in the U.S. -- 12 billion board feet – accounted for 24 per cent of U.S lumber consumption, and 60 per cent of Canadian lumber production.
Clearly, the U.S. does need Canadian lumber, especially if there is an increase in construction in the U.S.
Tariffs on Canadian lumber would simply increase prices for American buyers and fan inflation.
“Waiting to see what Trump will do with 25 per cent tariffs has already spooked the markets,” Taylor wrote. “Let us see what Trump’s strategy really is, as the tariffs will backfire very quickly if implemented, causing higher prices and inflation and the potential of shortages and job losses.”
