How tariffs are affecting lumber pricing
I have received several questions from owners and contractors regarding what to expect with lumber prices given the tariffs (or the potential of tariffs, depending on the day). The short answer is prices will go up. The long answer is much more complicated and hinges on a number of factors and considerations listed below.
1. Almost 30 percent of the lumber used in the U.S. each year comes from Canada.
There is no way this is easily replaced fast enough if demand for construction increases or at least holds steady. Some substitution can occur as it did years ago with people shifting between SYP and SPF, but that substitution is more price and availability driven than anything else.
2. Any tariffs or potential for tariffs creates opportunistic price increases.
Let's be honest: Businesses exist to make money.
When there is a chance to increases prices, businesses will take that opportunity to do so if they know the market will absorb it. This is especially true with a commodity such as lumber that has not kept up with inflationary price increases.
We at Frisco Woodline have already received a number of supplier emails for non-lumber building materials that are increasing prices in anticipation of tariffs. And, unfortunately, once non-commodity prices go up, it's not coming back down.
I would argue this is largely what happened during COVID. Because of stimulus money, more disposable income from fewer vacations, etc., the market had the ability to absorb significant price increases -- more than costs actually increased, hence record profitability for many companies. Tariff discussions create opportunities for mills to increase prices.
3. Demand, however, doesn't seem to be particularly strong for new construction at this time.
With increased costs and continued interest rate challenges, projects aren't moving forward just yet. This could keep lumber costs relatively down, but it also may slow down production to equilibrate supply and demand.
4. Tariffs do help to onshore manufacturing (a long-term positive), but the trees aren't all in America.
Lots of the lumber comes from Canada because that's where the trees are harvested. They're not transported to Canada for cheaper processing. Transporting them to America would be cost prohibitive and won't happen.
In the short-term, tariffs create more uncertainty and increased pricing, which only further adds to the inflation story. In the long-term, tariffs on lumber won't achieve the level of onshoring that can happen in other industries. My advice, based on what I'm seeing, is that tariffs (real or threats) will increase lumber prices, as we're already seeing this for the time-being.
Neil Agarwal is president and CEO at Frisco Woodline, one of the leading lumber suppliers in the DC and Baltimore markets. A version of this post first appeared on LinkedIn.
