Tariffs, Trade Tensions Dominate Montreal Wood Convention

The event drew strong attendance – a record 1,200 attendees and 112 exhibitors – reflecting a shared need among forestry professionals to regroup, exchange insights and find clarity in a volatile environment, said Sven Gustavsson, director of the Montreal Wood Convention.

Economic sessions were particularly well attended, with participants eager to understand how the ongoing trade dispute with the U.S. might impact inflation, interest rates and future demand. One economist warned that if tariffs persist, inflationary

pressures in the U.S. could rise, potentially forcing the Federal Reserve to maintain or even increase interest rates – an outcome that would likely slow economic growth further.

Said Benjamin Tal, deputy chief economist at CIBC World Markets, “The good news is one person makes all the decisions. The bad news? That one person makes all the decisions.” He joked to a standing-room-only crowd, referring to U.S. President Donald Trump’s flip-flopping on tariffs — announcing them, delaying them, then announcing again.

Tal suggested the trade war isn’t really about trade at all, but something else entirely. He pointed out that, aside from oil and gas, the U.S. actually runs a trade surplus with Canada.

“The goal is uncertainty, and the tool is chaos,” he explained.

The stock market and gas prices are key vulnerabilities to Trump’s disruptive strategy. Inflation is another weak spot. “Tariffs are inflationary. Period.” While Trump campaigned on bringing prices down, tariffs on imports would only push them higher.

And time is not on Trump’s side. The market is already showing signs of strain, with investors growing increasingly uneasy. Tal pointed to rising gold prices as a clear signal of that nervousness.

Negotiating tool

He suggested that the current tariff environment is being used as a bargaining chip and may not be sustainable long term. Tal believes that Trump is using tariffs as a negotiating tool to redefine market rules.

“We need to be very cautious about retaliating,” Tal warned. “It’s like saying we should stand up to the bully with force — but we don’t have the force.” He added that this is a game Canada has no choice but to play carefully.

Tal expects the Bank of Canada to cut interest rates to ease pressure on the economy, while the U.S. is unlikely to do the same — a divergence that could leave the Canadian dollar vulnerable.

The broader message was clear: while free trade might be a thing of the past, there is still room for negotiation. If both sides are willing to return to the table, he added, duties could eventually settle at a more sustainable level.

Negotiation tactics themselves were the subject of a well-received session led by Shai Dubey, a Queen’s University professor, who emphasized the value of emotional control and long-term relationship building in securing favourable outcomes. He noted that even concluded agreements can be improved if both parties remain open to dialogue.

Some in the industry are not optimistic that a resolution to the softwood lumber dispute is near.

During the panel discussion featuring influential voices in the industry, Jerome Pelletier, Vice-President of J.D. Irving’s sawmill division, said the Canadian government should negotiate a deal rather than try to fight with legal tools.

“With a new Prime Minister in Canada, I believe it should be top priority for our government to engage in a meaningful discussion with the U.S. […] and that lumber should be part of that discussion,” he said, noting that Trump enjoys negotiating.

Still, the fundamentals haven’t changed: the U.S. remains dependent on Canadian wood to meet its needs.

Luc Thériault, President of Domtar’s wood products division, noted that about 25% of lumber used south of the border comes from Canada – an imbalance that tariffs alone can’t correct.

Beyond the trade barriers, Thériault voiced deeper concern over broader economic signals, particularly in the construction sector. If consumer demand continues to weaken, the effects could ripple well beyond the tariff file.

Meanwhile, Ken Shields, Chair and CEO of Conifex Timber, addressed the ongoing sawmill closures across British Columbia, attributing them in part to a wave of regulatory changes in the province.

He noted that the B.C. government aims to raise the harvest level from 30 million to 45 million cubic metres.

However, given current lumber market conditions, Shields warned that such an increase could lead to oversupply and put downward pressure on prices.

When asked what governments could do to better support Canada’s residential construction market, CIBC’s Tal suggested governments can help sustain demand by offering attractive mortgage rates and providing incentives for developers to build rental housing — a priority, he noted, as today’s lack of activity will lead to a serious supply shortfall in two years.

And time is not on Trump’s side. The market is already showing signs of strain, with investors growing increasingly uneasy.

Tal pointed to rising gold prices as a clear signal of that nervousness.

Housing outlook
Shifting to the U.S. housing market, new residential construction is outperforming renovation and repair, largely due to builder incentives, said Hamir Patel, Paper and Forest Products analyst at CIBC Capital Markets.

As for U.S. housing starts, Patel remains optimistic about the long-term outlook.

He reiterated that housing represents over 70% of lumber demand and over 80% of OSB consumption in 2024.

Patel expects ongoing underbuilding to support 1.36 million starts in 2025 and 1.48 million in 2026.

Turning to the Canadian market, housing starts is expected to increase 6% in 2025, close to 260,000 starts, and 7% or close to 275,000 starts in 2026. Patel added that with the upcoming federal election, there’s been a lot of promises from all parties on ways to stimulate housing in the country.

Operating rates for both lumber and OSB are projected to improve in 2026, reaching approximately 83% for lumber and 80% for OSB, Patel added.