Crashing lumber prices are sending a "troubling" warning sign for the U.S. economy following uncertainty over President Donald Trump's tariffs and a "deteriorating housing market," the Wall Street Journal reported Monday.
"Crashing wood prices are troubling because they have been a reliable leading indicator on the direction of the housing market as well as broader economic activity," according to the Journal.
Two U.S. sawyers last week said they will decelerate production and "curtail output, slowing the decline."
Trump tariffs and import taxes have caused unpredictable impacts on supply chains.
"During the Covid-19 lockdown, two-by-four prices nearly tripled the prepandemic record, an early sign of the inflation and broken supply chains that would bedevil the economic reopening," the Journal noted. "When the Federal Reserve began raising interest rates in 2022 to curb inflation, lumber was among the first assets to decline in value. Now, prices are signaling caution again."
Lumber prices have had a turbulent road. In anticipation of Trump's threatened higher duties on Canadian imports and tariffs on wood, a surplus of wood was set aside in the United States.
Wood prices climbed in the spring when the White House claimed "it was investigating national security aspects of imported lumber and Trump threatened steep tariffs on all Canadian goods."
The price plummeted when Trump let down tariff talk on Canada, and then prices surged again in May when buyers were looking ahead.
"In May, they started surging again as buyers began stocking up ahead of the scheduled hike in existing Canadian lumber duties and Trump’s threatened tariffs," according to WSJ.
The Trump administration is reportedly considering more tariffs — as it did with aluminum, steel and copper products — on imported wood, citing national security concerns.
Producers plan to continue cutting back on production.
In July, residential building permits slipped to just 1.4 million units, a seasonally adjusted annual rate, and the fewest units in construction since June 2020.
Construction spending in the U.S. dropped by 3.4% in July compared to the record amount set in May 2024.