Tariffs fail to lift lumber costs as demand weakens in U.S.

Posted on August 27, 2025   |  

Many U.S. builders, contractors, and retailers bet that higher tariffs and lower interest rates would boost lumber prices, but those bets failed as prices slid sharply.

Lumber futures for September delivery closed at $595.50/MBF, down 14.3% from a record-high settlement of $695.50 on Aug. 1, and are down about 14% for the month, trimming year-to-date gains to 8.2%.

The price decline could reduce production just as housing activity begins to pick up, raising the risk of future supply shortages.

Analysts say the industry has been “hoping for demand that isn’t there”, with interest rate impacts overestimated and a rally driven by “buy the rumor, sell the fact” action on tariffs.

Canadian mills are operating below cost, signaling more production cuts ahead to rebalance supply and demand.

Despite tariffs rising sharply — with U.S. duties on Canadian lumber imports lifted to 20.56% (antidumping) and 14.63% (countervailing) — demand remains weak.

Q2 earnings fell short, with Home Depot and UFP Industries both missing expectations, reflecting broader market softness.

Without organic demand growth—likely not until 2026, especially in multifamily housing—the market will stay volatile, with the risk of much higher prices if supply cuts outpace demand recovery.