In the 1920s, Terrace, a small town nestled in the foothills of the mountains of British Columbia, was booming as the “pole capital of the world”, shipping Canadian cedar for telephone lines and power cables across the globe.
But today local sawmill owners such as Warren Gavronsky are on the frontline of a crisis hitting the country’s C$87bn (US$63bn) forestry industry as a result of US duties and a slowdown in the world’s largest economy.
“It’s the worst year in the last seven,” said the 45-year-old, the third generation in his family to run a mill, from his Just Cut It timber yard a few miles outside the town.
Wood prices have suffered large swings this year, first on US President Donald Trump’s threats of sweeping tariffs, and then as he imposed duties of 35.19 per cent on Canadian softwood lumber. On top of that, the industry is grappling with waning demand as the US housebuilding sector — one of its biggest clients — slows.
“In January, I closed the mill for three months as we just did not know what was going to happen due to the tariffs,” Gavronsky said. “Pricing lumber into the US was impossible.
“Normally we send about 30 to 40 per cent of our wood to the US, this year it is down to 10 per cent,” he added.
From the start of August to September 11, lumber prices tumbled 25 per cent, although they have recovered roughly 10 per cent in recent days.
At current market prices “there’s basically no Canadian producers that are making money right now”, said Dustin Jalbert, senior economist for wood products at price reporting agency Fastmarkets.
There is “going to be a major wipeout coming here in the months ahead”, if prices do not return, he added.
Canada’s forest products industry is one of the country’s largest employers, operating in hundreds of communities and providing 200,000 direct jobs, according to the Forest Products Association of Canada.
Last year, about two-thirds of the country’s softwood production went for export, with 90 per cent of that heading to the US, according to government data.
Trump has repeatedly railed against Canada’s lumber industry, telling the World Economic Forum in January, just days after he took office that “we don’t need their lumber because we have our own forests”.
In March he ordered a probe into alleged dumping of Canadian lumber into the US as a “national security threat”, prompting a sudden price drop. At the same time he issued an executive order for an “immediate expansion of American timber production” to reduce reliance on imports.
But many — including the US National Association of Home Builders — disagree with such protectionist policies, arguing lumber tariffs and duties act as a tax on builders, home buyers and consumers.
“For years, NAHB has been leading the fight against lumber tariffs because of their detrimental effect on housing affordability,” it said in August.
But Zoltan van Heyningen, executive director of the US Lumber Coalition, representing large and small producers, said Canadian producers simply “preloaded their warehouses” and shipped too much lumber to the US in an attempt to beat duties and tariffs, flooding the market and depressing prices.
“They created a massive supply side shock to the system that was coupled with weaker demand,” he said.
In British Columbia, where the forestry sector employed more than 50,000 workers and exports exceeded C$11.4bn in forest products last year, the effects are being felt on the ground.
“We are starting to see curtailments,” said British Columbia’s forestry minister Ravi Parmar. “So with those duties in place, it is certainly leading to significant challenges.”
“We are also starting to see a decline in customers in the US, not just because of tariffs . . . but also with the fact that Donald Trump is taking the American economy fast on a highway into a recession,” he said.
Mark Zandi, Moody’s Analytics chief economist, said falling lumber prices are a symptom of a US economic slowdown and a struggling housing market.
“You’ve got a lot of things coming together to conspire to weigh on demand affecting homebuilders,” Zandi said, listing higher mortgage rates, higher house prices and a weaker job market.
US seasonally adjusted housing starts fell close to a five-year low in August, according to the Census Bureau.
The US economy is “not in a recession, but we’re on the precipice of one”, said Zandi.
David Elstone, managing director of Vancouver-based consultancy Spar Tree Group, who has worked in the forestry sector for more than 25 years, is downbeat on the prospects for lumber prices.
“We’re going into the fall [autumn] and there’s typically a slowdown then with less seasonal demand,” he said.
Trump’s protectionist policies are the latest offensive in a long-running dispute over wood between the US and Canada that dates back to the 1980s.
Central to the feud is the Canadian industry’s ability to source trees from crown land — land owned by the federal or provincial government on behalf of the crown — and pay a “stumpage fee” set by provincial governments that is often lower than market prices, whereas the US industry buys from private land, which costs more.
The dispute is further complicated because many companies operate on both sides of the border, meaning they face US penalties and have to navigate currency fluctuations.
Early last month the US Department of Commerce issued a 217 page memo stating “we determine that countervailable subsidies are being provided to producers and exporters of softwood lumber from Canada”. On August 8 the department announced the combined anti-dumping and countervailing duty of 35.19 per cent, up from about 14.5 per cent.
Ottawa this week quietly withdrew two challenges to US anti-dumping duties on softwood lumber, a “strategic choice” aimed at improving relations with Washington, said Canada’s foreign ministry.
The issue for US housebuilders, according to Gavronsky, is that they need softwood lumber that comes from fast-growing evergreens such as pine — which are plentiful in Canada — and which is popular for home construction because it is light, cheap and easy to use.
However, the US industry accuses its Canadian rivals of dumping because they have no other market to sell into and it is convenient to ship it across the border.
Van Heyningen said: “The argument Canadian wood is better, or needed in the US more than ours, is also ridiculous. They simply send too much.”
It is not just small operators such as Gavronsky’s mill that are struggling.
Industry giant Domtar in early September said it would idle operations at its sawmill in Maniwaki, Quebec, from October, citing the increased US duties.
Toronto-listed Interfor, one of the world’s largest lumber producers, this month said “persistently weak market conditions and ongoing economic uncertainty” have forced a 12 per cent production cut until the end of the year.
In August Prime Minister Mark Carney announced a C$1.2bn investment in Canada’s forest sector, including C$700mn loan guarantees to address “the immediate pressures facing the softwood lumber sector”.
Van Heyningen said: “Only in Canada would that not been seen as a subsidy.”
Gavronsky said he saved his company by diversifying to rely less on the US. It has also returned to Terrace’s historical legacy of making transmission poles, this time for Canada’s new liquefied natural gas plant down the road in Kitimat.
“People who specialised in certain wood might not survive,” he said. “We definitely can’t count on our southern counterparts in the US to make any smart decisions for quite a few years.”