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Home remodeling prices headed 'even higher,' experts say, as U.S. to double Canadian lumber tariff

"I would expect homebuilding and home improvement projects to become a bit more expensive."

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The U.S. Department of Commerce said it will increase the tariff on softwood lumber imported from Canada from 8.99% to 17.9%. Softwood lumber includes structural lumber, used for framing houses, and plywood.

In 2019, almost one-third, 30.8%, of softwood lumber Americans used came from abroad and of that, 90.1% came from Canada, according to the National Association of Home Builders. That means roughly 27.75% of softwood lumber in the United States was imported from Canada.

This tariff might benefit U.S. lumber producers but will likely result in higher home prices and renovation costs for consumers, says Pam Heidel, operations director at the Home Improvement Research Institute. "Any time somebody does a remodeling project and has to buy lumber, that's just going to make prices even higher," she says.

Tariff might benefit U.S. lumber producers ...

The tariff comes at a time when lumber prices are already high. Demand during the pandemic, paired with supply chain delays and a labor shortage has driven up the price of wood. In April 2019, lumber was $410 per 1,000 board feet, according to Trading Economics. Now it is $824 per 1,000 board feet.

The move is meant to encourage retailers to buy American wood, says Scott Grawe, chair of the department of supply chain management at Iowa State University. "It should provide some benefit to U.S. lumber producers as the tariffs help close the price gap between imported and domestic lumber supply," he says.

In other words, because companies cannot buy cheaper lumber from Canada, they might buy from U.S. producers.

... but homebuyers could feel the effects 'fairly quickly'

"While increased material costs are not always immediately passed through to the consumer, I would expect these additional costs to make their way to consumers fairly quickly," Grawe says. "I would expect homebuilding and home improvement projects to become a bit more expensive as homebuilders look for opportunities to recover the increase in costs."

For every 1,000 feet of softwood lumber Canada exports to the U.S., there will now be an extra $99 in tariffs tacked on to the price, according to calculations by Hamir Patel, an analyst at the Canadian Imperial Bank of Commerce.

Any time somebody does a remodeling project and has to buy lumber, that's just going to make prices even higher.
Pam Heidel
operations director at the Home Improvement Research Institute

Supply chain logjams are already plaguing the home remodeling and homebuilding industry, says Robert Dietz, chief economist at the National Association of Home Builders. Shortages of tiles, appliances, and flooring have all driven up the price of home projects.

"Eighty-five percent of remodelers have increased prices of their projects," Dietz says. "Half have increased prices due to higher construction costs."

This tariff will just exacerbate the problem, he adds, as it will "add to the cost of building single family homes."

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