New Tariffs on Timber and Lumber

The White House announced that President Donald Trump has signed a proclamation changing the rules for timber and lumber imports to the U.S. Starting on October 14, new tariffs will be imposed on wood and lumber products. This includes a 25% duty on certain upholstered wooden items, kitchen cabinets, and vanities. Softwood timber and lumber imports will face a 10% tariff, while imports from the EU and Japan will have caps at 15%. The US Dollar Index struggled to recover around 98.00, but it was up by 0.06% for the day. Tariffs are taxes on specific imports that help local producers by making their prices more competitive against foreign goods. Unlike regular taxes, tariffs are paid upfront at the port of entry, while taxes are paid after purchase by individuals or businesses.

Impact on Currency and Inflation

Economists have mixed opinions on tariffs. Some believe they protect local industries, while others worry they could trigger trade wars and higher prices. Trump intends to use tariffs to strengthen the U.S. economy, targeting countries like Mexico, China, and Canada, which made up 42% of U.S. imports in 2024. Money from these tariffs could be used to lower personal income taxes. With the new tariffs on wood and lumber starting on October 14, we should expect more uncertainty in certain market sectors. Lumber futures will likely rise as the cost of imported wood goes up. This is a good time for long positions or call options on lumber contracts that expire in late October or November. During the tariff disputes between 2018 and 2021, lumber prices fluctuated greatly, and we expect similar movement this time. Recent data from the U.S. Census Bureau indicated that Canada provided over 70% of U.S. softwood lumber imports, making the Canadian market especially affected by these changes. We should think about taking short positions on companies that rely on building materials, like major homebuilders and home improvement retailers. Buying put options on a homebuilder ETF could be a smart move, as rising lumber prices will impact their profits. The National Association of Home Builders noted in August 2025 that lumber can make up to 18% of a new home’s sale price, which directly impacts their bottom lines. On the other hand, U.S. timber and lumber producers could gain because their foreign competitors will face new tariffs. Investing in U.S.-based lumber companies seems promising, as they are likely to see an increase in demand and pricing power. Their stock prices should rise as the October 14 date approaches. For the Canadian dollar, this news is negative. Since Canada is the largest lumber exporter to the U.S., we expect the CAD to weaken. A long position in the USD/CAD currency pair is a sensible response to this trade development. These tariffs will contribute to the inflationary pressures that the Federal Reserve is already watching. Higher costs in construction and manufacturing may lead to increased consumer prices soon. This could create uncertainty regarding future interest rate decisions, leading to more volatility in Treasury futures and other interest-sensitive investments. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now