Can the U.S. Lumber Industry Stand on Its Own?

Lumber market volatility is back in the spotlight — and for builders, remodelers and contractors, the uncertainty could spell higher costs and tighter supply. As one of the biggest factors, tariffs on Canadian softwood lumber could more than double this fall, potentially driving prices up without improving domestic supply.

Although these tariffs are meant to protect and stimulate U.S. lumber production, mills across the country are still falling short. New data from the first quarter show that U.S. sawmills are operating at just 64.4% of their potential capacity — a number that’s actually dropped steadily since 2017.

In short, mills could produce more lumber, but they aren’t.

Why? With limited foreign competition and lumber prices already elevated, many producers have little incentive to ramp up. As a result, U.S. production has stayed mostly flat, even during the surging demand in 2021 and 2022. Employment has also taken a hit, with sawmill jobs declining for the third straight quarter.

Impact of Domestic Lumber Production on Home Building Industry

Although demand has cooled slightly since the start of the year, there’s still not enough domestic supply to meet the industry’s needs. If U.S. output doesn’t respond and tariffs on Canadian lumber jump above 30% this fall, higher costs are inevitable.

For more details on historical comparisons of sawmill capacity and production, as well as insights into policy impacts, read this recent article in Eye On Housing from NAHB Director of Tax & Trade Policy Analysis Jesse Wade.