It’s Not Just Trump’s Tariff War Hurting BC’s Forest Sector

In August 2022, shortly after Canfor Corp. announced plans to spend more than US$200 million to build a new high-tech sawmill in southern Alabama, local media reported that a suite of subsidies had sealed the deal to keep the company in the state.

A photograph accompanying the article showed the Stars and Stripes waving in the wind atop a crane fitted with a huge grapple to move bundles of logs.

In front of the crane stood a long wall of pine logs blanketed by a bright blue sky studded with white clouds blowing in from the Gulf of Mexico, now renamed the Gulf of America in the United States under presidential decree.

The article noted that Alabama’s Mobile County Industrial Development Authority, a quasi-governmental agency appointed by the Mobile County Commission, had offered British Columbia-based Canfor $14.2 million in combined property and sales tax incentives to build the mill in Mobile County.

Canfor’s investment is just one of dozens of U.S. acquisitions made in recent years by B.C.-headquartered lumber companies.

An investigation by The Tyee shows that just three of those companies — Canfor, Interfor and West Fraser — have plowed a combined nearly US$8.4 billion to buy, expand or build 59 mills in about a dozen U.S. states over the past 20 years, making the bulk of those investments in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North and South Carolina and Texas.

Those investments all played out against the backdrop of U.S. lumber producers accusing Canadian provinces of subsidizing logging companies through low stumpage fees, subsidies they say resulted in Canada “dumping” softwood lumber into the United States.

But it’s not just U.S. President Donald Trump’s trade war — which might cause duties to rise to more than a third of the value of the lumber shipped — that explains the flood of Canadian investment south of the border.

Events in B.C., where the bulk of Canada’s lumber exports originate, are equally important.

Thanks to decades of logging at rates that the companies and provincial government alike knew could not be sustained, one B.C. mill after another has closed while forestry giants turn their attention to the U.S. South, where the trees grow far faster.

To unravel this story, The Tyee looked at B.C. company investments in the United States and at B.C.’s and Canada’s lumber export data over the course of nearly four decades — data that helps illuminate what brought the province’s forest industry to this critical juncture.

Back-to-back record years

To understand what fuelled the trade war and prompted B.C. companies to start plowing money into the United States, the years 1987 and 1988 are a good place to begin.

Both were record-setting for the number of trees logged — even given a four-month work stoppage strike by the International Woodworkers of America in 1987.

Those years also marked another first as B.C. adjusted to a new 15 per cent export charge imposed by the U.S. Department of Commerce on imported Canadian lumber, a charge that may soon be dwarfed by huge increases to softwood lumber duties under President Trump.

Those export charges marked the early stages of what remains to this day “one of the largest and most enduring” trade disputes between the United States and Canada.

But as the province’s Ministry of Forests reported in its annual report for 1988, exports from B.C. to the United States went up anyway.

“Lumber production increased by approximately 20 per cent to 15.9 billion board feet,” the ministry noted.

“The U.S. is the most important market for the province’s lumber,” the report continued. “Despite a drop in housing starts... consumption of lumber in the U.S. was at a record high.”

A depreciated Canadian dollar spurred B.C. production despite the added costs of a new export charge. That’s because when Canadian lumber sells in the United States, buyers pay in U.S. dollars, and those dollars have almost always been higher than their Canadian counterpart.

Tariff jumping

The Tyee’s review shows that the favourable difference in the currencies was pivotal in keeping B.C. lumber makers in the game in the lucrative U.S. market.

But B.C.’s lumber makers didn’t just ride the dollar. To improve profit margins, they built new supersized mills that upped the amount of lumber produced while lowering the number of workers needed to do the job.

Combined, these two factors kept B.C.’s industry in the game. But that game was about to enter a new phase that would have lasting consequences for the province’s mill workers, rural towns and forests alike.

Sharp periodic spikes in the logging of B.C.’s forests heralded shortages ahead. Meanwhile, as U.S. trade aggression continued, some domestic lumber makers began to turn their logging and milling attentions to the United States.

Today, the new threatened doubling of the duties Canadian lumber producers would pay on U.S.-bound lumber shipments — to 34.45 per cent from 14.4 per cent — will likely mean more B.C. mill closures and corresponding increases in Canadian forest company investments south of the border.

“If you can’t beat them, join them,” Werner Antweiler, an associate professor at the University of British Columbia’s Sauder School of Business and research chair in international trade policy, told The Tyee. “You are diversifying your business by investing south of the border.

“Cross-border acquisitions offer large benefits — access to a much bigger market,” Antweiler continued.

Every Canadian lumber producer that invests south of the border or is considering doing so is also “tariff jumping,” Antweiler said, which means increased profit margins potentially at the expense of fewer mills in B.C. and more in the United States.

The Tyee reached out to Canfor, Interfor and West Fraser for comment, specifically asking each what lay behind their decisions to invest heavily in the United States, what role the ongoing softwood lumber dispute between Canada and the United States played in those investments, and whether forest policies in B.C. played a role in their decisions to ramp up investments elsewhere.

Only West Fraser replied. While not directly answering any of the questions, the company said in an email that since West Fraser’s founding in Quesnel in 1955, the company “has grown to become a global company with operations in Canada, the U.S., U.K. and Europe.”

West Fraser went on to say that in addition to its significant foray into the United States, it has also invested in three mills in Alberta, two in Quebec and one in Ontario since 2021. And that besides closing its Fraser Lake mill in B.C., it has also closed four mills in the United States since purchasing them.

According to the Tyee analysis, with those four U.S. mill closures, West Fraser is still left with two dozen facilities in the country.

Where the lumber and investments have flown

To better understand just how important the cross-border trade in lumber has been for B.C. and what may lie ahead, The Tyee analyzed trade data from 1988 through to the end of 2024; 1988 was the first year Statistics Canada kept electronic records.

The Tyee’s analysis also used company press releases, quarterly and annual reports and reports by business media outlets to quantify how much Canfor, West Fraser and Interfor invested in U.S. mills.

That review shows that between them the three companies have, since 2004, spent more than US$8.4 billion in today’s dollars to buy, upgrade and build a combined 59 mills in 13 U.S. states, most of them lumber mills and most of them located in the southeastern United States.

Not only do trees grow far faster in the southeastern United States than they do much farther to the north in Canada, but Canfor, West Fraser, Interfor and other Canadian companies also invested in the region knowing that their chances of increased profits were far greater given the region’s corporate-friendly labour climate.

Employers in the southeastern United States consistently pay lower wages, are less likely to pay for employee pension plans and health insurance, and generally operate in a union-free environment as compared with states farther to the west and northeast, according to the non-profit, independent think tank the Economic Policy Institute.

The U.S. investments by the three B.C. companies also dovetail with the largely successful efforts by U.S. lumber producers, particularly those in the southeast of the country, to get penalties imposed on imports of Canadian lumber.

BC lumber and the US market

Numbers don’t lie. And what the numbers show is that for decades, Canfor, West Fraser, Interfor and other B.C. lumber makers benefited enormously from cross-border lumber sales.

From 1988 through the end of 2024, B.C. lumber producers shipped a combined 923 million cubic metres of lumber to buyers outside Canada, including the United States, China and Japan, with the value of those shipments worth a combined $327 billion in today’s dollars.

The United States’ share of those exports was 667 million cubic metres of lumber at a combined sales value of $211.6 billion, or $5.71 billion on average per year.

What that means is that for the past 37 years, nearly three out of every four lumber pieces sold by B.C. lumber producers went to U.S. buyers, and those buyers accounted for roughly two out of every three dollars paid.

In only three of those 37 years — 2011, 2012 and 2013 — did B.C.’s U.S.-bound lumber shipments ever fall below half the total volume exported. Those three years coincided precisely with years that Canada’s dollar exceeded or was at par with its U.S. counterpart.

Dumping?

A frequent complaint of the US Lumber Coalition, which has led the charge to impose duties on Canadian lumber, is that B.C. and other Canadian provinces effectively subsidize logging activity through low timber-cutting fees, known as stumpage fees. Setting stumpage fees too low fuels overproduction of lumber in Canada, the coalition alleges, with B.C. and other Canadian provinces then “dumping” excess lumber into the United States to the detriment of U.S. mills.

“Canadian softwood lumber producers dump their massive and ever-growing excess lumber production into the U.S. market on a daily basis while their provincial and federal governments make one new subsidy announcement after the other, and then complain about being subject to U.S. trade laws,” US Lumber Coalition executive director Zoltan van Heyningen said this April, a charge that with minor variations has been the most sung song in the southern U.S. lumber producers’ hymnal for decades.

The trade statistics tell a different story, however.

Far from dumping an “ever-growing” volume of subsidized lumber into the United States, B.C.’s mills have produced less and less lumber in recent years. That translates into lower, not greater, exports into the United States. This is what happens when domestic sawmills close, as they have over and over again in recent years to the tune of tens of thousands of lost jobs in B.C.’s forest industry.

In 2024, for example, B.C.’s lumber shipments to the United States were just shy of 11.3 million cubic metres.

That’s a big number for sure, but not remotely close to the more than 28.6 million cubic metres of lumber that U.S. buyers bought from B.C. lumber makers in 2005.

An even more instructive year to look at is 2021, when prices for two-by-fours in the United States reached the highest levels in recorded history. If ever there was a year for B.C. companies to “dump” every stick of lumber they could into the United States, 2021 was it.

Yet the total volume of lumber exported from B.C. to the United States that year stood at 14.3 million cubic metres, half of what it was in 2005.

Why the huge drop?

Much of it has to do with what has happened to B.C.’s forests, particularly its vast interior forests, over the course of the last four decades.

Beetlemania

In each decade from the 1980s on, at the provincial government’s urging, logging companies in B.C. dramatically increased the number of trees they cut down in response to significant insect infestations that had killed large numbers of trees, although far from all the trees and certainly not the forest itself.

The first and most consequential of those infestations involved spruce bark beetles in the Bowron valley, to the east of Prince George. As recently reported by The Tyee, that infestation triggered a then-unprecedented response as logging rates shot up in the valley.

From 1981 through 1987 logging companies created the largest clearcut in B.C.’s history — clearing away all the trees in an area equivalent to 100,000 football fields, an opening so big that it was clearly visible from outer space and became one of the biggest clearcuts in the world.

The upswing in logging resulted in 15 million cubic metres of logs coming out of the Bowron valley in just seven years, enough wood to build 250,000 homes, with much of that lumber going where it had always gone — the United States.

Not long after the Bowron clearcutting ended, B.C. logging rates and lumber production shot up again in the early 1990s as the forest industry, with the encouragement of the provincial government, rapidly increased activity in the vast Chilcotin plateau in response to a mountain pine beetle outbreak.

A decade later, the province’s interior was plagued by a much bigger and more consequential mountain pine beetle outbreak. That outbreak sent lumber production in B.C. through the roof and led to the most significant years of lumber exports to the United States in the province’s history.

The trade data analyzed by The Tyee shows that for seven years beginning in 2001, lumber exports to the United States were at their highest and most sustained levels in history. In all, more than 174 million cubic metres of lumber were shipped south in those years.

Stumped by coalition

During such spikes, B.C. frequently set its stumpage rates charged on the trees logged in designated beetle salvage-logging zones at 25 cents per cubic metre — the bare minimum allowed. This, combined with the periodic and notable spikes in U.S.-bound lumber shipments from B.C., helped fuel charges from south of the border that the province’s lumber producers were subsidized and that those subsidies led to dumping.

Making matters extremely difficult to resolve is the fact that land ownership in B.C. is effectively the mirror opposite of what it is in the southeastern United States. In B.C., almost all of the forests cut down by the logging industry are on publicly owned lands overlain by First Nations land claims, while almost all trees logged in the southern United States originate on privately owned lands, where no state-administered stumpage rates apply.

One provincial government after another has been stumped as to how to effectively and once and for all deal with the US Lumber Coalition’s arguments, and now a new and potentially much more difficult chapter in the interminable trade war is underway.

The Tyee reached out to the provincial minister of forests, Ravi Parmar, by email asking how concerned he was about the flight of investment capital from B.C. to the United States, how significant the ongoing softwood lumber dispute was in prompting those investment decisions, and what B.C. could realistically do to persuade companies to make renewed investments in the province.

“B.C. licensees have been transitioning capital to U.S. mills for over a decade to diversify their corporate balance sheet portfolios,” Parmar said in part. “There have also been examples of companies neglecting to invest in upgrades in their B.C. operations, which has also impacted their bottom lines,” he added.

Parmar went on to say that “we are not going to let unfair and unwarranted duties and tariffs destroy our forest sector,” and that he and other premiers were working with their federal counterparts on a “Team Canada” approach to fight the latest threatened tariffs through trade diversification and other initiatives that will support forestry workers and companies.

The emailed response from Parmar’s communications department did not provide answers to questions on whether overall declines in logging rates may have been a factor in B.C. companies investing in the United States or whether decisions by previous governments to substantially increase logging rates in response to beetle attacks had contributed to a fibre supply crisis that led B.C. companies to invest elsewhere.

Paying more

What makes the imposition of duties on U.S.-bound Canadian softwood so perplexing is that the duties actually drive the cost of lumber up for U.S. homebuilders — something that works to the obvious advantage of U.S. lumber makers, of which a growing number are now Canadian-owned.

“The U.S. produces only 35 million board feet of lumber annually, far short of the 50 million board feet it consumes, making it heavily reliant on imports,” the New York City-based trade and market analytical firm Trading Economics reports. “While steep duties on Canadian softwood lumber have long been in place, these tariffs are set to more than double by September, further driving up material costs for builders.”

And what homebuilders pay more for, homebuyers do as well.

Harry Nelson, an associate professor at the University of British Columbia’s school of forestry and an expert on softwood lumber, economics and trade policy, told The Tyee that the US Lumber Coalition’s assertions of subsidies can and do flit from one alleged wrong to another, but that overall the playbook is quite limited.

“The coalition has basically only so many strings on their instrument. Historically their major string was that stumpage in Canada is not set by market forces. It’s administered. And that’s a subsidy,” Nelson told The Tyee.

“Anti-dumping has become the significant component now,” Nelson added.

Ironically, given President Trump’s willingness to walk away from the trade agreements that he himself signed, Nelson believes the only real hope for an end to the dispute is for a negotiated settlement, which has happened in the past with softwood lumber agreements signed by the two countries. These brought some certainty to the cross-border trade but at the cost of either limits on the volume of exports and/or duties on a portion of those exports.

To date, Canadian lumber producers have paid billions of dollars in duties on their U.S.-bound lumber, duties held by the U.S. Department of Commerce. With the interest accrued on those payments since 2017, the total amount paid approaches US$9 billion.

Money talks. So does resource depletion.

With duties mounting and a rapidly declining number of economically viable trees to cut down in B.C., it seems certain that growth for B.C. lumber companies lies south of the border, not here at home.