When politicians talk about making housing more affordable, they rarely mention the import duties sitting on the materials used to build it. They should. According to the National Association of Home Builders, building material costs have risen 41.6% since the start of the COVID-19 pandemic — far outpacing general inflation — and tariffs on softwood lumber, steel, and aluminum have played a significant and measurable role in that increase. The NAHB's April 2025 Housing Market Index survey found that builders estimate a typical cost effect from recent tariff actions at $10,900 per new home. That is not a subsidy for domestic workers. It is a direct, regressive tax — paid by every homebuyer — routed through the price of wood and steel.
A Tax by Another Name
Milton Friedman was characteristically direct on tariffs: they are taxes on consumers, dressed in the language of national interest. A tariff does not fall on a foreign government or a foreign producer. It is collected at the border by the U.S. Treasury and passed through the supply chain to the person who ultimately buys the finished product. In residential construction, that person is the homebuyer.
The mechanics are straightforward. NAHB estimates that $204 billion worth of goods were used in the construction of new single-family and multifamily housing in 2024, with $14 billion — roughly 7% — sourced from abroad. Softwood lumber, steel, aluminum, and engineered wood products constitute the bulk of those imports. When the federal government imposes a 25% duty on steel or a 35% levy on Canadian lumber, the importer absorbs a portion and passes the rest to the builder, who passes it to the buyer. The incidence falls heaviest on those trying to afford their first home in an already supply-constrained market.
Softwood Lumber: Decades of Self-Inflicted Damage
The softwood lumber dispute between the United States and Canada is one of the longest-running trade conflicts in North American history, and its damage to housing affordability has compounded with every escalation. Canada supplies approximately 85% of U.S. softwood lumber imports and accounts for nearly a quarter of total U.S. lumber supply — a market reality that protectionist tariffs cannot simply wish away.
The dispute stems from a structural difference in how timber is sold in each country. In Canada, roughly 94% of timber comes from crown land, where stumpage fees are set by provincial governments. U.S. producers argue this constitutes a subsidy, enabling Canadian mills to undercut American prices. The Commerce Department agrees, at least in part. Anti-dumping and countervailing duties have been in place since 2017.
The rate history tells the story. In August 2024, the Commerce Department raised the combined tariff rate on Canadian lumber from 8.05% to 14.54% following its fifth administrative review. By the summer of 2025, those anti-dumping and countervailing duties had climbed to a combined rate of approximately 35.2% on average, with an additional 10% tariff layered on top of Canadian softwood lumber exports as of mid-October 2025. The effective combined rate now exceeds 45% on the material that frames most American homes.
The effect on lumber prices has been dramatic at peak moments. In May 2021, the Framing Lumber Composite Price hit $1,500 per thousand board feet — nearly three times its pre-pandemic baseline — and set all-time highs for nine consecutive weeks. Even adjusted for inflation, 2021 lumber prices were 17% above their 25-year average, breaking a record that had stood since 1996. A portion of that spike was pandemic-driven demand. But the restricted import supply — a direct consequence of tariff policy — amplified every upward pressure. Prices have since moderated to roughly $600 per thousand board feet as of early 2026, but with tariffs at historic highs, the floor has been raised.
Steel, Aluminum, and the Cascading Cost Problem
Softwood lumber is not the only building material caught in the crossfire. In February 2025, the White House announced that 25% tariffs on all imported steel and aluminum products would take effect in March. Steel is ubiquitous in residential construction — it reinforces concrete foundations, forms structural beams in commercial and multifamily buildings, shapes window frames and HVAC components, and anchors the metal-framed walls of townhomes and apartments. Aluminum is the standard material for window frames, exterior cladding, and roofing systems.
NAHB Chairman Carl Harris was direct in response to the announcement: "The administration's move to impose 25% tariffs on all steel and aluminum products imports into the U.S. runs totally counter to this goal [of reducing housing costs] by raising home building costs, deterring new development and frustrating efforts to rebuild in the wake of natural disasters. Ultimately, consumers will pay for these tariffs in the form of higher home prices."
The steel tariff escalated further to 50% by June 2025. When these levies are stacked atop the lumber duties, the cumulative effect is significant: building material costs have risen 41.6% since the pandemic, far outpacing the 19.6% general price inflation recorded between January 2020 and January 2024. The building materials component has inflated more than twice as fast as the broader economy.
Bastiat's Broken Window, Applied to a Housing Shortage
Frédéric Bastiat's 1850 essay "That Which Is Seen, and That Which Is Not Seen" laid the groundwork for understanding why protectionist policies always appear more attractive than they are. The seen benefit of a lumber tariff is visible and politically legible: domestic sawmill jobs protected, campaign donors satisfied, a talking point about American workers. The unseen costs are dispersed, invisible, and borne by millions of individual homebuyers whose purchasing power quietly erodes.
Thomas Sowell captured the same logic in his observation that "there are no solutions, only trade-offs." When the government imposes a 45% tariff on Canadian lumber to protect American mill workers, it does not create lumber — it makes existing lumber more expensive for every builder, in every market, at every price point. The trade-off falls hardest on entry-level buyers who are already priced out of a market suffering from a structural shortage of 3.7 to 4 million units.
Hayek's insight about prices as information is equally relevant. The price of softwood lumber, undistorted by tariffs, would signal to builders and developers exactly how much wood costs to source and would direct capital toward the most efficient supply chains. Tariff-inflated prices transmit false information: they make imported lumber appear artificially expensive, domestic lumber artificially cheap, and they discourage the investment in production and trade relationships that would increase total supply. The result is a market that builds fewer homes than it otherwise would, at higher prices than necessary.
The Path Forward: Free Trade in Building Materials
The free-market prescription is clear and consistent across every tradition of liberal economics: unilaterally eliminate tariffs on building materials. Not negotiate, not reciprocate, not pause — eliminate. The U.S. does not need Canada to lower its stumpage fees before American homebuyers deserve access to affordable lumber. The tariff is a tax levied by the American government on American buyers. Congress can remove it at any time.
NAHB has repeatedly urged exactly this. The association has called on successive administrations to suspend tariffs on Canadian lumber and enter into a new softwood lumber agreement that would eliminate duties altogether. The economic logic is straightforward: the United States cannot domestically produce enough softwood lumber to meet current construction demand. Restricting imports does not change that constraint — it simply makes the shortage more expensive. A country that faces a housing deficit of nearly 4 million units cannot afford to tax the materials needed to close it.
Friedman, asked on the Donahue show whether free trade cost American jobs, gave the answer that still stands: of course it moves some jobs. But it creates far more wealth than it destroys, and it raises the living standards of everyone who buys the resulting goods — including everyone who cannot currently afford to buy a home. The tariff on lumber is not a housing policy. It is an anti-housing policy, and the data make that case as plainly as any economist could.
