Canadian, Mexican tariffs delayed, higher lumber prices still likely this year, per NAHB

The situation surrounding tariffs remains fluid, with a flurry of activity in Washington this week. On March 4, President Donald Trump imposed tariffs of 25% on Canadian and Mexican goods entering the U.S. and an additional 10% tariff on Chinese products, which follows an initial 10% tariff last month, according to reporting from the National Association of Home Builders.

Then on March 6, Trump announced a one-month tariff delay until April 2 on all products from Mexico and Canada that are covered by the United States-Mexico-Canada Agreement (USMCA), a free trade treaty that Trump negotiated in his last term to replace NAFTA. While there is no specific language in the USMCA addressing Canadian softwood lumber, NAHB worked with the White House to ensure it was covered under the latest pause on tariff implementation.

Two essential materials used in new home construction, softwood lumber and gypsum (used for drywall), are largely sourced from Canada and Mexico, respectively. Additionally, numerous raw materials and components, ranging from steel and aluminum to home appliances, are sourced from China and are already subject to existing 301 and 232 tariffs, which add increased costs to construction that are ultimately passed on to consumers in the price of a home.

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Canada, Mexico and China are America’s three largest trading partners. If the new tariffs on Mexico and Canada go into effect next month (the tariffs on China have already been imposed), they are projected to raise the cost of imported construction materials by more than $3 billion. NAHB has received anecdotal reports from members that they are planning for tariffs to increase material costs between $7,500 and $10,000 on the average new single-family home. NAHB will be surveying members to better gauge real-world impacts as suppliers adjust prices in response to proposed or imposed tariffs.

Further aggravating the situation, the prospect of 25% tariffs on Canadian products, which include softwood lumber critical to the U.S. home building industry, would be on top of the existing 14.5% lumber tariffs previously imposed by the U.S. Department of Commerce. This means that tariffs on Canadian lumber will surge to 39.5% on April 2. Moreover, the Commerce Department has signaled that it plans to roughly double the 14.5% tariff rate later this year, possibly in September, meaning that the overall tariff rate on Canadian softwood lumber could rise above 50% in the fall and even approach 60%.

Two New Executive Orders on Lumber

On March 1, the White House issued two executive orders on lumber. The first order centers on the need to expand American timber production and the second directive looks to examine if imports of timber and lumber threaten national security.

NAHB welcomes efforts to eliminate barriers to domestic lumber production to reduce our reliance on lumber imports and meet home builders’ demand. The U.S. currently imports roughly 30% of the softwood lumber the nation uses because there is not enough domestic capacity to meet demand.

Trump’s directive to examine current policies related to permitting and timber salvage are welcome first steps toward responsibly increasing domestic production. Trump’s executive order directing the Commerce Department to investigate national security concerns related to lumber imports could also help identify obstacles that have limited sawmill production to date.

NAHB looks forward to working with all interested stakeholders to increase the amount of harvestable timber as part of a responsible and more efficient U.S. forestry policy. However, as the U.S. seeks to reduce its reliance of imported lumber and increase domestic production, U.S. sawmill capacity also needs to rise to produce harvested lumber needed to build, remodel and repair homes and apartments.

What is NAHB Doing?

NAHB urged the president to reconsider his March 4 directive to impose tariffs on Canadian, Mexican and Chinese goods, given the long lead time and significant production capacity needed to create additional domestic supply. While the White House decision to institute a one-month delay on USMCA-compliant goods and services from Mexico and Canada is a positive development, even the threat of tariffs creates an uncertain business climate.

For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability. In effect, the tariffs act as a tax on American builders, home buyers and consumers. NAHB has taken several recent actions to roll back tariffs and to boost domestic production of softwood lumber:

Moving forward, NAHB will continue working with all relevant stakeholders to roll back tariffs on building materials, boost sawmill production and increase the domestic supply of timber from federally owned lands in an environmentally responsible manner to help fix building material supply chains and ease costs.

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