The asymmetric effects of softwood lumber duties, tariffs, and mortgage rates on housing payments

• A 25% lumber tariff increases monthly mortgage payments by $26-$41. • Tariff impact weakens by 36% as markets adjust from rigid to flexible conditions. • 19 basis point rate reduction completely offsets 25% tariff impact on payments. • Monetary policy is the dominant driver of housing affordability over trade policy. This paper quantifies how softwood lumber tariffs propagate through the U.S. economy to affect homebuyers’ monthly mortgage payments, comparing this channel to direct mortgage rate changes. Using an integrated Armington-Leontief framework with 2022 IMPLAN data, we trace a tariff shock on Canadian softwood lumber into residential construction costs and mortgage payments. For a baseline $420,000 home with a typical principal-and-interest payment of about $2,190, a 25% tariff raises monthly payments by $26-$41 (1.2%–1.9%), depending on market flexibility. In contrast, a one percentage point mortgage rate increase raises payments by $229, nearly six times larger. The tariff impact weakens by 36% as markets adjust from rigid to flexible conditions, whereas mortgage rate effects persist throughout the loan term. A relatively small 19 basis point rate reduction completely offsets a 25% tariff impact. Our results show that for housing affordability, monetary policy dominates trade policy, with critical implications for the ongoing U.S.-Canada softwood lumber trade dispute.