The Canadian Lumber Tariff will play an extensive role in the price inflation of building a new home. Recently, the United States, through the Trump Administration, has put a 3%-24% tariff on Canada’s soft lumber trade. What exactly does this mean for home builders in the United States? The short answer is that the price of building a new home goes up. Lumber is a crucial material that is used to build homes. In fact, the average U.S. home uses 15,000 board feet of lumber. With that being said, the United States does not have enough supply to meet demand, which is why it is imported.

According to fortune.com (Fortune 500), “America must import about one-third of its lumber supply from Canada because U.S. lumber production is simply not robust enough to meet the nation’s needs. Therefore, lumber imports are vital for the construction of affordable homes for American families.”

It is said that the tariff was anticipated, therefore, lumber prices have already increased about 20% and added $3,600 (median) to the price of building a new home.

Some politicians and analysts don’t believe that the tariff will have an affect on the price of home building. Bob Wetenhall, RBC Capital Markets homebuilding and building products analyst, told CNBC,

New tariffs on Canadian softwood lumber announced by the Trump Administration on Monday are nothing more than “a papercut. It’s not going to affect the real estate market, [and] it’s not going to impact housing prices.”

However, the National Home Builders’ Association disagrees. Granger MacDonald, chairman of NAHB on nahbnow.com states, “NAHB respectfully disagrees with comments made by Commerce Secretary Ross that the tariffs on Canadian lumber imports into the U.S. will have little effect on the cost of housing,” said NAHB Chairman Granger MacDonald Tuesday. “While Ross cannot cite specific consequences regarding this punitive tariff, we can.”

MacDonald went on to say “clearly, protectionist measures to prop up domestic lumber producers at the expense of millions of U.S. home buyers and lumber users is not the way to resolve the U.S.-Canada trade dispute or boost the U.S. economy.”

“As an industry that is on the front lines of this issue, NAHB would be happy to discuss this matter with the White House and seek solutions that will not harm housing affordability for millions of hard-working American families,” MacDonald said.

Although the decision to put a tariff on Canada’s lumber wasn’t favorable, keep this in mind if you plan on building a new home. The price didn’t go up because we want to charge you more, it’s going up due to the magnified cost of lumber that we rely on Canada for.