U.S. Proposed Tariff on the Wood Sector within North America

Abstract

This study evaluates the implications of the United States (U.S.) proposed tariffs on North American wood markets. Two scenarios were modeled using a ‘wood sector’-tailored FOrest Trade Equilibrium Model (FOTEM), which utilizes a general equilibrium model framework. The first scenario considered the U.S. imposing tariffs without retaliation from Canada and Mexico, and the second scenario modeled retaliatory tariffs from Canada and Mexico. Results indicate that U.S. GDP remains largely unaffected. Still, the U.S. wood sector suffers output losses under retaliation, particularly in hardwood lumber and paper-related industries (printing and publishing), which depend heavily on North American trade flows. Both Canada and Mexico experience contraction in their GDP and would be better off without retaliation. Canada emerges as the most affected partner, with severe disruptions in engineered panels and softwood products. Mexico’s Fiberboard, Furniture, Oriented Strand Board, and Pellets sectors show increased output due to trade diversion, though domestic resource and production constraints may limit these gains. The study highlights that protectionist measures can shield select industries in the short term but risk disrupting integrated supply chains and weakening overall competitiveness. The study concludes that coordinated trade policies are essential to sustain domestic production while reducing destabilization across North American wood markets.