Prime Minister Mark Carney announced a commitment of up to $1.2 billion to bolster Canada’s lumber industry, which faces significant challenges due to impending U.S. duties. Speaking in West Kelowna, B.C., Carney detailed that the plan includes up to $700 million in loan guarantees aimed at helping forestry companies maintain and restructure their operations. Additionally, he pledged $500 million in grants and contributions for product development and market diversification.

"Canada does not dump lumber into the United States, and we will continue to make the case that these current and proposed duties are unjustified," Carney stated. He emphasized that Canada is a crucial supplier to the U.S., accounting for about a quarter of the U.S. lumber market and contributing to lower housing costs in America.

The long-standing dispute over softwood lumber between the U.S. and Canada has seen the U.S. impose duties, claiming unfair Canadian government subsidies. The U.S. Commerce Department is expected to announce an increase in duties on Canadian softwood lumber to approximately 35 percent, up from 14.4 percent. This increase combines anti-dumping and countervailing duties.

U.S. President Donald Trump has intensified the conflict by ordering a boost in U.S. lumber production and launching an investigation into the national security implications of lumber imports under Section 232 of the Trade Expansion Act. This section has previously been used to impose tariffs on steel, aluminum, and copper.

In 2022, Canada exported $40.3 billion worth of forest products and building materials to the U.S., making it one of Canada’s largest export categories. Carney also announced plans to establish a homebuilding agency called Build Canada Homes, which will prioritize the use of Canadian lumber, steel, and aluminum in construction projects. This agency will require federal contractors to source domestic lumber.

The Canadian government is also working on initiatives to diversify international markets for its lumber and implement retraining programs for affected workers. Canada has consistently denied U.S. claims regarding artificially low stumpage rates, which are fees paid by sawmills to harvest timber from government-owned forests. In 2020, the World Trade Organization largely supported Canada’s position against U.S. tariffs.

However, there are signs of a potential shift in Canadian leadership perspectives. British Columbia Premier David Eby recently indicated that some Canadian officials might consider a quota on softwood lumber exports to the U.S. as a means to resolve the ongoing dispute.

The Canadian lumber industry is already feeling the impact of U.S. duties, while production in the U.S. South has been increasing. The policies of the Trump administration may exacerbate these trends, potentially leading to higher housing prices in the U.S. due to difficulties in replacing Canadian lumber supplies in the short term.

Last week, Trump raised tariffs on imports from Canada that do not comply with the North American Free Trade Agreement to 35 percent, up from 25 percent. Carney mentioned that he plans to speak with Trump "when it makes sense," noting that he has not communicated with the president recently. When asked about a potential trade deal with Canada, Trump acknowledged that Carney had reached out.

Carney pointed out that the average U.S. tariff rate on Canadian goods remains low, with over 85 percent of trade between the two countries still tariff-free due to existing exemptions. The Canada-United States-Mexico Agreement (CUSMA) is set for a mandatory review next year. Carney suggested that without a trade agreement, Canadian investment in the U.S. could decline, stating, "We have 40 million people. We are the second-largest investor in the United States in the world. Without an agreement, there will be less by definition."

While Trump has cited cross-border fentanyl trafficking as a justification for some tariffs, Carney argued that the amount of drugs flowing from Canada to the U.S. is minimal compared to other sources.