U.S. lumber dependence gives Canada trade advantage

Daryl Swetlishoff, senior managing director and head of Canadian research at Raymond James, joins BNN Bloomberg to discuss the outlook for Canadian lumber in 2026.

Canada is in a unique position to leverage America’s need for lumber as officials review the Canada-United States-Mexico Agreement (CUSMA) in the New Year, according to a trade expert.

U.S. President Donald Trump claims the U.S. doesn’t need anything from Canada yet Canada produces about 25 per cent of all U.S. lumber demand. Nearly 90 per cent of softwood lumber is exported to the American market.

“The good news is they need our wood. We think that there’s an ability to make a deal at some point,” Daryl Swetlishoff, head of research at Raymond James Ltd. told BNN Bloomberg in an interview.

Softwood lumber tariffs now reached a combined 45 per cent after the U.S. added a 10 per cent tax to existing anti-dumping and countervailing duties. CUSMA ensures a large portion of goods remain tariff-free, however softwood lumber is specifically excluded from these protections.

While the U.S. relies on Canadian supply, Swetlishoff said Canada relies on the U.S. as its primary customer. He said the sheer volume of Canadian production makes diversification to markets in Europe or Asia difficult.

“We have a very efficient large industry and the reality is the U.S. will be the home for the lion’s share of our market for the foreseeable future,” said Swetlishoff.

The U.S. could open state-owned forests in Washington, Oregon and Idaho but it does not have enough capacity to mill, process and ship new timber, according to the Government of British Columbia.

Impact of tariffs

The Canadian lumber sector is currently facing massive tariffs following accusations of unfair trade practices by American lumber companies. British Columbia accounts for 50 per cent of Canada’s exports to the U.S. but has seen sawmills close.

“You’re seeing cash losses throughout the U.S. south, and we’re going to see curtailments manifest itself in that region as well,” said Swetlishoff.

He said valuations for lumber companies are near all-time lows, which makes some stocks attractive. He recommends companies like Canfor, Doman, and Stella Jones because of their strong balance sheets, good margins, and potential growth through acquisitions.

“The bad macro makes their targets quite attractive, and we see them all growing their top and bottom line through mergers and acquisitions over the next 12 to 18 months,” said Swetlishoff.

Help is on the way

Canada announced the Green Construction through Wood (GCWood) program to invest over $9 million in projects to accelerate the adoption of innovative Canadian wood products such as mass timber.

The federal government previously announced a $1.2 billion to assist struggling softwood lumber companies. This includes a $500-million increase from the Softwood Lumber Guarantee Program, which provides businesses with essential access to government-backed loans.

With files from The Canadian Press