The southern U.S. is poised to surpass Canada’s long-held dominance over the North American lumber industry as decades of trade restrictions take a toll on its northern neighbor.

The U.S. region is set to eclipse Canada for softwood lumber capacity for the first time since at least 1970, according to commodity pricing agency Fastmarkets. It’s a remarkable turnabout that signals how much a key Canadian resource sector has diminished due to years of U.S. duties and other challenges including wildfires, land-use regulation and insect infestation.

The U.S. hiked import duties on Canadian softwood lumber by almost 81% in August, the latest move in a simmering four-decade dispute between the trading partners. Analysts anticipate that levies — currently at 14.54% — could double again by next year under the Commerce Department’s annual review.

The measures show how trade policies can reshape an industry, creating new winners and losers in the process. Import restrictions have been a hot topic during the U.S. election, with Republican candidate Donald Trump calling for sweeping tariffs on foreign goods entering the U.S..

The U.S. has long accused Canada’s C$10 billion — $7.2 billion — industry of dumping low-priced wood into the country and argued that government fees Canadian loggers pay to harvest timber amounts to a subsidy. The dispute has hurt British Columbia, where forest products accounted for a quarter of the value of all exported commodities in 2022.

Further levies could be “quite devastating for the sector,” said Kurt Niquidet, chief economist of the BC Council of Forest Industries. “You would see widespread curtailments throughout not just B.C., but across Canada.”

As Canadian sawmills get squeezed by high costs and lower revenue — most notably in the forest-rich western province of British Columbia, the U.S. South is enjoying gains in the industry. The U.S. Lumber Coalition has credited the duties for a robust boost to American investment and capacity.

North America lost 4% of sawmill capacity through closures this year alone — and more than 40% of that was in B.C., according to Dustin Jalbert, senior economist at Fastmarkets.

Forestry firm Canfor Corp. said in September it would close two B.C. sawmills by year end and take a C$100 million write-down, citing the duties as well as a lack of wood supplies. West Fraser Timber Co., the world’s largest lumber manufacturer, and smaller rivals Interfor Corp. and Western Forest Products Inc. have also suspended or shuttered western Canadian mills.

Interfor and Western Forest Products declined to comment, while West Fraser and Canfor didn’t respond to requests for comment.

Demand turnaround

The U.S. South has been able to offset some of B.C.’s losses, thanks to faster-growing private forests that have made the region the “largest wood basket on the continent,” said Brooks Mendell, president of Forisk Consulting in Georgia. But he said ample U.S. lumber supply assumes “Canada doesn’t go to zero, because Canada is still an important player.”

Unless the U.S. becomes self-sufficient, it’ll still need to import wood. Americans could be left paying a premium to do so from a permanently diminished Canadian sector or from more distant forests like Scandinavia’s.

“The U.S. can only produce so much more incremental lumber before they reach a maximum timber harvest,” said Russ Taylor, a B.C.-based forestry consultant who has worked in and covered the industry for 45 years.

There are glimmers of a turnaround in lumber demand that could halt Canada’s slide. U.S. single-family home construction is on the rise and the National Association of Home Builders sees the trend extending through 2026. Fastmarkets expects North America’s lumber production capacity to fall short of demand this year for the first time since a pandemic-fueled renovation boom.

“Next year, if we have a good demand recovery — you know, demand up, supply down — it doesn’t take a business economist to tell you what that probably means for prices,” Fastmarket’s Jalbert said.