A sharp decline in U.S. lumber prices is stirring new concerns about a potential slowdown in residential construction across North America and Europe. Futures for lumber on the Chicago Mercantile Exchange dropped below $580 per thousand board feet this week — a $19.50 decrease, or 3.3%. This marks a considerable drop from late March, when prices peaked at $685, the highest level seen in over two years.

Futures contracts — agreements to buy or sell a commodity at a future date for a predetermined price — often reflect investor sentiment. The downturn in lumber futures now signals growing pessimism about near-term building activity. These concerns aren’t limited to the U.S., as European producers are also bracing for ripple effects.

Trade Tensions Fueling Market Volatility

Much of the uncertainty stems from escalating trade tensions involving the United States. The Biden administration has imposed or proposed a wave of new tariffs, including on steel and aluminum. There is speculation that similar measures could soon target lumber, further straining a construction sector already grappling with high material costs.

EU member states are now reportedly preparing to vote on a package of retaliatory tariffs against American goods — potentially including lumber — according to Finnish business outlet Kauppalehti. If implemented, these countermeasures could trigger further retaliation from Washington, leading to even more duties on European wood imports.

Such a development would strike a heavy blow to Swedish and Finnish exporters, who count the U.S. as a major market.

“Additional tariffs could squeeze the construction sector even further, dampening demand and slowing down building starts,” one industry analyst noted.

Cost Burden Passed to Homebuyers

Meanwhile, U.S. builders are sounding alarms over the financial burden that higher tariffs could place on construction firms — and, by extension, on homebuyers.

According to estimates from Trading Economics, these trade measures could increase the average cost of building a single-family home in the U.S. by approximately $6,400 — or about €5,860. That’s a significant jump, especially in an environment where housing affordability is already a pressing issue.

“If building costs continue to rise, the risk of a broader construction slowdown grows — which could negatively impact the lumber industry in both North America and Europe,” the Trading Economics report said.

Broader Economic Risks

Construction industry leaders warn that a prolonged slowdown could send shockwaves beyond just lumber suppliers and housing developers. A cooling in the construction sector would likely reduce demand for labor, limit growth in related industries, and curtail exports — especially for countries like Canada, Sweden, and Finland that depend heavily on lumber trade.

“Several voices from the construction sector warn that a deepening trade conflict could have a cooling effect on the broader economy,” the report continued. “A drop in construction activity would not only affect demand for materials but also employment and exports, including in the Nordic region.”

In both North America and Europe, stakeholders are now watching market developments with increased anxiety, hoping that diplomacy can ease the economic pressure before it leads to widespread construction slowdowns.

Originally reported by Pulpaper News.