Forest Products Market Impacts

New tariffs and the European Union Deforestation Regulation (EUDR) are reshaping the hardwood industry. This article examines their immediate impact on trade, pricing, and market access—and what businesses must do to adapt.

The forest products industry in the U.S. is currently monitoring several factors that will undoubtedly affect our collective market outlook. The two most pressing factors are the current administration’s impending tariffs on imports from Canada, Mexico, and China and the implementation of the European Union Deforestation Regulation (EUDR). In this article, we explain these factors and their role in potential market impacts.

TARIFFS
The details surrounding the tariff decisions are rapidly developing. In early February 2025, President Trump announced a 30-day delay in tariffs targeting all imports from Mexico, China, and Canada with a 25% rate, except for a 10% rate on energy imports from Canada. In late February, he announced that the tariffs would proceed once the 30-day reprieve expires.

WHAT WILL THIS MEAN FOR THE FOREST PRODUCTS INDUSTRY?
If these tariffs proceed as planned, many individuals in the forest products industry who regularly conduct business in these countries will be impacted. The hardwood industry is specifically concerned as the potential of history repeating itself gets closer to becoming a reality.

In 2018, these very same tariffs severely impacted the hardwood industry. In response to the first Trump administration’s tariffs on Chinese goods, China imposed retaliatory tariffs of up to 25% on American hardwood products exported to China. The hardwood industry was immediately impacted, suffering an immediate loss of more than $1.045 billion in lumber sales to China during the trade war years and a lasting trade reduction valued at over $730 million every year, even after the tariffs were removed. Domestic prices also plunged due to a lack of export markets, creating additional pain and long-term damage to the industry. The hardwood industry has yet to recover from the market loss that accumulated throughout this time. There is concern that the industry won’t be able to sustain a similar situation that negatively affects its ability to manufacture and export products and provide much-needed jobs to individuals in rural America.

“As a member of the forest products industry, our stakeholders and staff hope tariffs are not increased, as a significant percentage of lumber products are exported,” said Jess Parton, Timber Procurement Manager, Gilkey Lumber Company. “If significant tariffs are placed on hardwood lumber exported to China, the effects could be catastrophic. Currently, approximately 50% of my company’s kiln-dried grade lumber is shipped into China, and any significant tariffs placed on U.S. exported lumber to China could dramatically impact company profits, sustainability, employment security, and growth.” 

Industry experts share that the full impact of these impending tariffs on lumber markets won’t be felt immediately. Still, we should be prepared for the long-term effects that could reshape the dynamics of our industry.

EUROPEAN UNION DEFORESTATION REGULATION (EUDR)
The EUDR is a regulation targeting deforestation and forest degradation by demanding rigorous supply chain transparency. Companies importing or trading forest products in the EU must demonstrate that their commodities—such as pulp, paper, wood, and biomass—do not contribute to deforestation or degradation. This requires geolocation data, due diligence statements, and proof of sustainable harvesting practices. The EUDR, which was initially scheduled for implementation in December 2024, was delayed by one year to allow companies more time to prepare.

However, preparing for compliance isn’t a quick fix. These tasks of-ten require custom development, extensive testing, and deployment timelines that can extend over several months or more.

“The EUDR requirements will be difficult for most lumber companies and suppliers in the U.S. forest industry to comply with, especially small operations in remote areas,” said Parton. “Forest industry operations often cannot collect, store and analyze detailed information related to the origin of the supply, or provide detailed documentation on their land use practices.”

For many companies, these regulations are an added burden that can affect market impacts. If you are a forest products company conducting business with any companies in the EU, you must plan to comply with these new regulations. Failure to comply could lead to negative revenue impacts, severe penalties and fines, and reputational damage that could affect long-term business relationships.

STAY INFORMED AND PREPARED
This year is off to an interesting start, to say the least, but it’s not uncommon for the forest products industry to face a few curveballs now and then. In a time when the economic landscape is constantly evolving, the best thing we can all do is to stay informed and prepared so that we are equipped to adapt to any changes that come our way. Tariffs and new regulations might unleash fears of the unknown. Still, they also introduce opportunities for companies to pivot business strategies and work in innovative ways they haven’t thought of before.

Trade policies directly affect hardwood exports, but broader economic forces also shape the industry. For a wider look at market trends, see the “Steady Growth or Economic Shock?” article in this issue.

By DR. JOHN HATCHER, JR., PH.D., CF, Executive Director, North Carolina Forestry Association