The U.S.-Canada deal that doesn’t need CUSMA to happen
On July 1, the United States opted against renewing the Canada-U.S.-Mexico Agreement. However, unlike the NAFTA negotiations in 2018, the U.S. economy is much more vulnerable to disruption this time around. As the U.S. pushes its neighbour to “pay” for a renewal, Canada should take this opportunity to similarly push to resolve longstanding bilateral issues.
For example, the U.S.-Canada softwood lumber dispute remains one of the longest bilateral trade issues, dating back to the 1980s. However, today, the structural conditions for a durable settlement are more favourable than they have been in decades. The Canadian government should prioritize this issue in its engagements with the U.S.
Affordability has become a central political concern, and lumber is among the few inputs the executive branch can address directly
The Trump administration is under significant pressure to address the soaring costs of home prices in the U.S. Survey data from this past June indicate that only about one in five Americans approve of the administration's handling of living costs, with housing among the most frequently cited concerns. The National Association of Home Builders estimates that current duties on building materials, of which softwood lumber duties are the largest single component, add between US$9,200 and US$10,900 to the cost of a new single-family home. Unlike steel, aluminum, or copper—whose prices are largely shaped by global forces beyond Washington's control—softwood lumber can be addressed through a bilateral agreement requiring no new legislation and no Congressional intervention. In practical terms, it is one of the most accessible levers available to the administration for improving affordability.
Canadian market share has fallen to its lowest level in over a decade
The trade picture has also shifted decisively in the U.S.’s favour. Canada's share of U.S. softwood lumber imports by value declined from roughly 87 per cent in 2017 to approximately 71 per cent in 2025. An agreement concluded today would formalize Canadian import volumes well below the import levels that prevailed when the 1996 and 2006 Softwood Lumber Agreements were negotiated—meaning U.S. negotiators can achieve managed trade on more favourable terms than in any prior round, without demanding concessions that Canada has not already made effectively through a decade of market contraction.
Bilateral tensions are elevated, and that is precisely what makes Canada's concessions most available right now. With the broader trading relationship under maximum stress, Ottawa has an incentive to resolve one of its most long-standing bilateral irritants. Prime Minister Mark Carney publicly confirmed in July 2025 that a future trade deal could include export quotas on softwood lumber, describing resolution as a “top priority.” Even though I am certainly not in favour of trade barriers, I would like to solve the softwood lumber issue pragmatically, which can bring market certainty for producers in both countries and consumer benefits.
The supply gap left by declining Canadian shipments is being filled not by American mills, but by European producers
Perhaps the most telling is what the existing duty regime has actually produced. As Canadian shipments declined, the supply gap was not filled by American mills but by European producers who entered the U.S. market duty free. In 2025, European suppliers captured approximately 18 per cent of U.S. softwood lumber import value, according to U.S. International Trade Commission data. The duty regime has not reduced American reliance on imports much—it has instead shifted that reliance toward European competitors facing lower trade barriers, with no measurable benefit to domestic producers or homebuilders.
Domestic lumber producers in the U.S. have historically opposed negotiated settlements, preferring the protection duties provide. That opposition has not disappeared, but the conditions that once made their argument compelling no longer hold: Canadian market share has fallen to its lowest level in more than a decade, European producers have captured nearly a fifth of U.S. softwood import value duty free, and housing affordability is cited as one of the most politically salient issues in the country. The industry’s case for the continued impasse is weaker today than at any prior point in the dispute’s history.
This dispute has never been resolved through litigation. Both prior settlements—in 1986, 1996, and 2006—came through negotiation, and the 2006 agreement alone returned nearly $4-billion in collected deposits while delivering close to a decade of relative price stability. The conditions for a comparable outcome are in place today and Canada should use its leverage in the CUSMA talks to push for a resolution.
Daowei Zhang is George Peake Jr. Professor of forest economics and policy at Auburn University in Alabama, and the author of several books, including The Softwood Lumber War: Politics, Economics, and the Long U.S.-Canadian Trade Dispute (Resources for the Future Press, 2007).
The Hill Times