Timber Trade War: Trump Imposes 25% Tariffs on Canada and Mexico

The timber industry is facing a new tremor after US President Donald Trump signed on Saturday, February 01, 2025, at Mar-a-Lago, an executive order imposing tariffs of 25% on imports from Canada and Mexico, and additional tariffs of 10% on products from China. The decision, part of a broader package of trade measures, is having a major impact on global supply chains and threatens to destabilize multiple economic sectors, from the timber to the auto industries.

Immediate Impact on Markets

The effects of the decision were felt as Asian markets opened on Monday morning. Global stock market indices recorded significant falls: -1.7% for the S&P 500, -2.3% for the Nasdaq and -2.6% for the Euro Stoxx 50. The European auto sector was hit hard, with Stellantis down 6.4% and Volkswagen down 5.7%, mainly due to their significant operations in Mexico, where they manufacture and export to the US. The US dollar appreciated by around 1% against the major currencies, while the euro hit its lowest level since November 2022, depreciating by as much as 2.3% against the dollar.

Consequences for the Construction Industry

According to experts quoted by Wood Central, the new tariffs could add between $35,000 and $45,000 to the cost of a new home in the US, given that about 701TPTP3T of imported softwood lumber is used in residential construction.

"Tariffs are undeniably working in the direction of higher wood prices," explains Rajan Parajuli, associate professor of forest economics at the State University of New York, to the same woodcentral.com. Past experience with the US-Canada Softwood Lumber Agreement from 2006-2015 shows that while local producers earned about $1.6 billion, US consumers paid about $2.3 billion more.

Opportunities and Risks for European Exporters

Against this tense backdrop, European timber producers could gain a temporary competitive advantage in the US market. Germany and Sweden, although together exporting only 3.49 million cubic meters of softwood lumber to the US in 2023 (compared to 28.1 million cubic meters from Canada), could find opportunities to increase market share. However, this window of opportunity remains uncertain, given President Trump's threats to extend tariffs to European goods as well.

Reactions and Countermeasures

Canada and Mexico have already announced response measures to protect their national economies. Canadian Prime Minister Justin Trudeau has said his country will impose tariffs of 251TPTP3T on $155 billion worth of US goods, implemented in two stages. Similarly, Mexican President Claudia Sheinbaum announced "tariff and non-tariff measures" in defense of her country's interests.

Prospects for the Future

Industry experts warn that replacing Canadian imports will not be simple. Robert Dietz, chief economist for the National Association of Home Builders (NAHB), points out that "wood types are different from area to area and not all are suitable for home building" and that expanding domestic U.S. production "requires time, refined policies, and addressing the industry's labor shortage."

Despite these warnings, President Trump expressed his firm belief on Truth Social, the social network he owns, that the US owns "more timber than it can ever use." In the same controversial post, he claims that the US "subsidizes Canada" for no reason and "doesn't need any of what they have", suggesting that the measures will force a rebalancing of North American trade relations.

Conclusion

These are times of uncertainty and rapid change in the global trade landscape. While President Trump's stated motivations for launching this trade war focus on national security and reducing import dependence, it remains unclear how these measures will contribute to the stated goal of "making America great again". The coming weeks will be crucial to better understand the long-term strategy and the real implications of these decisions that are shaking the foundations of North American trade.