One lumber analyst says tariffs are just one piece of a much bigger uncertainty puzzle hammering the housing market
A federal court dealt another blow to the Trump administration's tariff agenda Thursday, ruling that the 10% global tariffs the president imposed earlier this year are illegal.
A split three-judge panel of the Court of International Trade in New York found the levies were invalid after small businesses sued, determining 2-1 that Trump had overstepped the tariff authority Congress had granted the president under the law.
The ruling was hardly a surprise to some legal observers. Back in February, Kenneth Katkin, law professor at Northern Kentucky University's Chase College of Law, told Mortgage Professional America that this outcome was coming.
"A 10% global tariff is going to be struck down as illegal very quickly," Katkin said. "Because the statutes that authorize tariffs simply do not authorize global tariffs. There has to be some kind of proof that some foreign governments or foreign companies are engaging in some kind of unfair practice.
"There's no way that could be applied to the whole world. So he's just blowing smoke there, and that's going to be struck down very quickly."
An appeal is expected, which would send the matter to the US Court of Appeals for the Federal Circuit and potentially back to the Supreme Court, which struck down a previous, broader set of tariffs back in February.
This development is just one thread in a much larger story that continues to weigh on the housing market. Russ Taylor (pictured top), president of Russ Taylor Global and one of North America's foremost lumber market analysts, said the lumber market has been stuck in a quagmire.
"There's just so much uncertainty that the market's been stalled," Taylor told Mortgage Professional America. "It's kind of like there's quicksand all around you, and you've got to be careful you don't step in it, because it's all there."
Uncertainty is the real enemy
Taylor said the market is getting hit from multiple directions at once, and no single factor is solely to blame.
"With the Iranian war, constricted trade flows, high oil prices, inflation, everyone's being more conservative," he said. "That keeps prices at bay."
Softwood lumber imports from Canada are already carrying a combined duty penalty of 45%, while European lumber faces a 10% tariff. Those costs have driven up input costs for builders even as demand for new homes stays sluggish. Taylor noted that housing starts have declined every year since their 2021 peak, and he expects 2026 to be no different.
Higher oil prices are making things worse at every stage of the construction supply chain, from logging crews through to the lumber yard.
"Higher oil prices, that's going to impact all the way through the supply chain," Taylor said. "Loggers, truck drivers, mills, transportation, market distribution, all the way to the customer."
With gas prices in parts of the US approaching $5 a gallon — nearly double what drivers were paying just three months ago in some states — the squeeze on household budgets is feeding directly into housing market hesitancy.
"Everyone's worried about their jobs, and they're worried about the economy and everything else," he said. "Everyone gets nervous, and they stop spending. And that's kind of what's happened."
The outlook: more of the same
Taylor’s not expecting things to turn around quickly.
"All that theory doesn't matter," he said. "If things are unaffordable and there's uncertainty and consumer confidence is weak, then nothing happens."
Taylor said US lumber consumption has been essentially flat at around 50 billion board feet for a decade, despite persistent economist forecasts of a demand surge tied to millennial homebuyers and a shortage of three to four million housing units nationally. The repair and remodeling sector, which accounts for roughly 40% of US lumber consumption, has been equally stuck.
With the tariff battle still playing out in the courts, the next big trade fight is already on the horizon. The USMCA renewal is due by July 1, and Canada is pushing to get softwood lumber included in the updated deal for the first time.
"The federal government of Canada will be approaching the US government about some sort of a package trying to deal with steel, aluminum, auto parts, and lumber, because they're being heavily penalized right now," he said. "But I don't think they can somehow pull off all of that in less than two months, because governments don't work that fast."
A lumber inclusion in the USMCA would ease some of the cost pressure US builders have absorbed over the past year. But Taylor pointed out that the US domestic industry has done very well under the current tariff structure and has every reason to resist a deal that changes it.
"The only region really making any money is the US, because they've got this huge subsidy they've put on importers," Taylor said.
That advantage, he said, gives the domestic industry little reason to welcome any trade deal that disrupts the current setup.
"Lumber has always been, for the last 45 years, sort of hung out on its own," he said. "And the US industry is probably saying, 'We like the way the tariffs and the duties work right now. We don't want to change it because it gives us a competitive advantage.'"
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
