Despite claims to the contrary, the U.S. needs our forests

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Trump’s threats to Canada — imposing crushing tariffs on Canadian goods, or making Canada the 51st state — may be repulsive, but they are unfortunately very real. While a full takeover of Canada is likely just sabre rattling, the imposition of tariffs is a genuine concern. This is a time for aggressive leadership. Policymakers focused on “win-wins” or reactive strategies must rethink their approach if they are to effectively represent Canada.

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Trade negotiators must stay focused on one key fact: Canada produces many products and services upon which the United States depends. Canadian goods generate enormous “consumer surplus” for Americans, all of which could be lost if the price of these goods rises. The 25 per cent tariff threats are troubling for Canadians, but they are equally alarming for those in the U.S. who rely on Canadian products.

Canada supplies a quarter of U.S. lumber needs, giving it strong leverage. Lumber is a primary input in U.S. home construction, which is a core component of the U.S. economy. The housing market is often cited as a leading indicator of the overall strength or weakness of the American economy. Economists understand that a significant rise in lumber prices will increase the cost of building and renovating homes. It’s no surprise that the U.S. National Association of Home Builders protests every time our two countries negotiate the Softwood Lumber Agreement and there is talk of new tariffs on Canadian lumber.

A sharp increase in lumber prices would fuel inflation and shrink disposable income, straining the consumer-driven economy. The timing for tariffs on lumber couldn’t be worse for the U.S., with the spring building season soon approaching. On the supply side, U.S. lumber mills are already operating near capacity, and importing softwood lumber from other regions is expensive. In short, even if Canadian lumber prices doubled (or even quadrupled, as they have in the past), U.S. consumers would still bear the higher costs — though begrudgingly.

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At the World Economic Forum last week, President Trump declared, “We don’t need their lumber, because we have our own forests.” In theory, this is true: U.S. forests could meet domestic demand. In 2024, the southeastern U.S. harvested nearly twice as much timber as Canada, primarily due to the region’s productive Southern Yellow Pine plantation forests. Add in the untapped state-owned forests of Washington, Oregon and Idaho, and self-sufficiency becomes a plausible goal. However, ramping up harvesting from publicly owned forests, most of which are currently protected, would provoke fierce public backlash, conflict with the Environmental Protection Act and clash with the interests of both large and small private timberland owners. Even if Trump were to push for increased harvesting, the U.S. lacks the logging and mill capacity to process the trees into lumber. So while there is some truth to Trump’s statement, the threat remains unrealistic.

So, here’s what Canada can do: U.S. lumber prices averaged around US$400 per thousand board feet (MBF) in the first half of January. Canada should impose an export tax of US$800/MBF, effectively doubling the price. This move would immediately increase the cost of lumber in the U.S., making the risks of a trade war with Canada clear to American consumers.

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The Canadian forest products industry will likely be the first to oppose this proposal. However, there’s a simple solution: the Canadian government should simultaneously announce that it will redistribute the revenue from the export tax back to Canadian lumber exporters, who would undoubtedly appreciate receiving more than double what they earned earlier this month. Think of it as the Canadian government setting a price similar to how a monopoly operates, collecting the tax from the U.S. importer and redistributing the revenues to Canadian businesses.

Why hasn’t the Canadian government done this before? We should have taken this approach every time the U.S. has imposed or threatened to impose tariffs on Canadian softwood lumber, but we haven’t — largely because Canadian politicians have been hesitant to upset U.S.-Canadian relations. Now, however, the boat is rocking, and it’s time for new leadership to step forward.

JensPeter Barynin is a former executive at the Ontario Ministry of Natural Resources, Vice President of Timber at Fastmarkets and teaching fellow at Harvard University. He is currently the Chief Economist at VIVI Economics.

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