New trade barriers in the United States, a collapse in access to raw materials, and difficulties in diversifying markets are pushing the Canadian wood industry toward structural contraction. This is the key finding of the new outlook “Softwood Lumber – Tariffs, Turbulence and New Trade Flows to 2030,” authored by Håkan Ekström (Global Wood Trends, Seattle) and Glen O’Kelly (O’Kelly Acumen, Stockholm).
According to the report, the combined impact of U.S. tariffs – from the new “Section 232” measures to higher Anti-dumping and Countervailing Duties – has increased Canadian producers’ costs by 25-30 percent, eroding competitiveness and pushing many mills below the profitability threshold. This dynamic is particularly critical for a sector that exports about 65 percent of its production, 87 percent of which goes directly to the United States.
EXTRA-EU OUTLETS AT A MINIMUM
Canada’s response is focused on greater openness toward alternative markets – China, Japan, India, Europe, and the Middle East – but the process is slow and complex. Dimensional and quality standards in many countries do not align with North American specifications, logistics costs are higher, and building stable commercial relationships takes years. It is therefore no surprise that exports outside the U.S. are “near historical lows”, amounting to 13 percent of the total in 2025 compared with a twenty-year average of 20 percent.
On top of tariff pressure comes a domestic challenge: the drastic reduction in timber availability, particularly in British Columbia. Over the past twenty years, the province has seen its allowable annual cut shrink by one third due to environmental constraints, agreements with Indigenous communities, infestations, and wildfires. The result is a 50 percent collapse in harvest levels and a rise in log prices that has rendered many long-standing mills uneconomical. Companies have reacted swiftly: a massive migration of capital toward the U.S. South, where fiber is more abundant and less expensive.
The closure of sawmills drags down the entire industrial ecosystem: fewer sawmill residues mean higher costs—and sometimes shutdowns—for pulp mills, panel producers, and pellet manufacturers. The impacts on local communities are severe, affecting employment, exports, and GDP contributions, with rural areas among the hardest hit.
COUNTERMEASURES
Ottawa is attempting to soften the blow through loan guarantees, innovation incentives, and “Build Canadian” policies to promote domestic wood use. But, the report emphasizes, such measures cannot offset the structural disadvantages tied to fiber scarcity, high log costs, and weak competitiveness in the U.S. market.
According to the report, Canadian production capacity will continue to decline through 2030, especially in older facilities. Only modern sawmills may benefit from any potential easing of U.S. tariffs, amid a likely increase in lumber prices. Some growth prospects can be seen in non-U.S. markets—albeit slowly—and in the domestic construction sector, which, to meet demand, would require a doubling of residential starts by 2035. However, this goal requires reforms that remain distant: faster permitting, targeted policies, and lower building costs.
