When President Donald Trump pushed for a 25% tariff on Canadian softwood lumber at the start of 2025, the goal was clear: force a reset of North American trade and revive U.S. lumber production. What followed was something else entirely—a rapid collision between political ambition and market reality that left a major American timber giant reeling and sent shockwaves through the U.S. housing market.
The warning signs appeared almost immediately. By February 2025, Washington had layered the new 25% duty on top of existing anti-dumping and countervailing tariffs totaling 14.54%, pushing the effective burden toward 40%. Then, in late July, the U.S. Department of Commerce finalized an additional 20.56% anti-dumping duty based on 2023 data—locking in the escalation ahead of a hard August 1 deadline with no exemptions.
For Weyerhaeuser, the largest U.S. lumber producer, the consequences were brutal. The company’s Q2 2025 profits were cut in half, plunging from $173 million a year earlier to $87 million. Revenue slipped to $1.88 billion, and earnings missed expectations—triggering a sharp market reaction. Management warned investors that the pain wasn’t over, forecasting another $60 million drop in adjusted earnings in the third quarter as demand softened, prices fell, and costs climbed.
This wasn’t just a bad quarter. It was a signal.
Lumber and OSB panel prices sank as uncertainty froze buying decisions. Homebuilders grew cautious. Projects slowed or paused. And the ripple effects spread quickly across sawmills, manufacturers, and distributors—compressing margins throughout the supply chain. Even industry groups that support tougher trade enforcement acknowledged the spillover: when construction slows, everything connected to it feels the drag.
The housing market felt it next. In May, U.S. single-family home sales recorded their sharpest decline in nearly three years, as high interest rates collided with rising material costs. Builders warned that prolonged tariffs could add up to $14,000 to the cost of a new home by 2027, pricing more buyers out and deepening the slowdown. Inventory piled up. Confidence thinned. The math stopped working.
Canada, meanwhile, didn’t rush to retaliate with noise. It recalibrated with leverage.
Ottawa reminded Washington—quietly but pointedly—that Canadian pension funds hold roughly $1 trillion in U.S. investments, growing by about $100 billion annually. No threats were issued, but the implication was unmistakable: Canada has cards to play. Prime Minister Mark Carney held firm that any deal must prioritize Canadian jobs, refusing to be rushed by U.S. deadlines.
More consequentially, Canada began diversifying its lumber exports. Within a year, the share of Canadian lumber shipped to the U.S. fell from 78% to 68%, with volumes redirected to Europe and Asia. Ottawa also began weighing export quotas—a step it had long resisted—while engaging visiting bipartisan U.S. senators in talks about a more managed trade framework under USMCA.
Washington’s counter-move aimed to boost domestic supply. The administration accelerated plans to expand logging on federal lands, proposing a 25% increase in quotas and reopening areas restricted under the 2001 roadless rule. The optics were bold. The impact, experts say, would be modest—less than a 1% increase in national timber supply. Logging takes years to translate into usable lumber, and mills can’t run on promises.
U.S. producers are adapting—investing in automation and efficiency—while some Canadian firms are hedging by building mills in the southern United States, closer to pine forests and lower transport costs. It’s a defensive reshaping of supply chains to reduce tariff exposure. But legal challenges and environmental lawsuits loom, threatening delays.
The bigger picture is stark. Tariffs meant to pressure Canada have rebounded onto U.S. producers, squeezed a flagship company, and added strain to an already fragile housing market. Canada’s response—disciplined, diversified, and patient—has shifted leverage rather than surrendered it.
This isn’t just a lumber dispute anymore. It’s a lesson in how quickly trade policy can collide with production reality—and how the costs show up not in speeches, but in profits, prices, and postponed homes.