Duties on Canadian softwood are surging. Are home construction costs about to follow suit?
The clock is ticking down to President Trump’s August 1 deadline for Canada and the US to strike a deal to avert a sweeping new wave of tariffs on Canadian goods crossing the border southward.
But the US has already pushed ahead with other tariffs on Canadian imports – including the Commerce Department’s decision last week to hike anti-dumping duties on Canadian softwood lumber to 20.56%.
That increase, which raises lumber tariffs by more than 14%, signaled a new escalation in the trade war and sparked fears that the price of building a home in the US could jump.
A new Canadian Chamber of Commerce report claimed that combined US tariffs – including duties on steel and aluminum – on Canadian goods could spike average homebuilding costs to $14,000 per American home by year-end 2027 if they stay in place.
Those claims were disputed by the US Lumber Coalition (USLC), which blasted what it described as “unfounded scare tactics” designed to undermine the president’s trade policy.
But Russ Taylor (pictured top), a wood market expert and analyst, told Mortgage Professional America the ongoing trade turmoil likely spelled bad news for housing affordability, which is already under strain across many major markets in the US.
Canadian imports make up nearly 70% of the US lumber market – but even with prices climbing steadily in recent months in anticipation of duties kicking in, Taylor said Canadian sawmills are still only “marginally profitable.”
If duties continue to climb, “[sawmills] have got to get prices up at least 15% just to stay in the game,” he added. “And because inventories are low in the US, I think we’re going to see a price spike.”
Even if those increases are restricted to somewhere in the region of $10,000 to $15,000, a relatively minor amount compared with the overall cost of buying a new property, Taylor said they could have a significant negative effect on Americans’ ability to afford a home.
“If it goes up $10,000, $14,000, that’s just going to dent the affordability of homes in the US a little bit further,” he said. “For the consumer, this is not good. All you’re going to do is reduce the ability of consumers to buy a new home and that’s not good for the economy.”
US home price growth continued to slow in May, with national prices even declining monthly in some markets, according to the latest FHFA and S&P CoreLogic Case-Shiller reports.https://t.co/ctlPhR9gTp
— Mortgage Professional America Magazine (@MPAMagazineUS) July 29, 2025
Construction industry still gloomy about the economic outlook
The National Association of Home Builders (NAHB) and Wells Fargo track homebuilder sentiment in the US through the monthly Housing Market Index (HMI), which gauges builder confidence across the country on a scale ranging from zero to 100.
A reading above 50 suggests a majority of homebuilders are confident about construction prospects – but economic uncertainty and a sluggish housing market are continuing to weigh on builders, the latest survey showed.
For newly built single-family homes, builder confidence in the July market was up just one point from June, coming in at 33, while the outlook for current sales conditions was just 36 and sales expectations for the next six months increased slightly – but remained low, at 43.
Meanwhile, 38% of builders reported cutting prices in July, the highest percentage since NAHB started tracking the figure in 2022.
When will homebuilder confidence return?
Taylor said stubborn mortgage rates, which have budged only slightly throughout the year so far, were hindering both consumer and homebuilder confidence, while the “total chaos” at play in the lumber market also wasn’t helping.
For now, he said it’s difficult to see when some of the fog will clear in the lumber outlook. “The biggest uncertainty right now is all about demand and the lack of consumer confidence, and that’s tied to high mortgage rates,” he said.
“A year ago, we said ‘[Mortgage] rates should come down and things should be good by the end of 2025.’ Here we are now saying it’s going to still be pretty bad-looking through the end of 2025. Maybe it will get better – but we just don’t know.”
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