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%Lumber prices have risen to their highest level in more than two years on news that U.S. President Donald Trump has ordered an investigation into softwood imports from Canada.

The lumber probe is the latest salvo in an escalating trade war between the neighbouring countries.

President Trump has asked the U.S. Commerce Department to investigate the harm to America’s national security caused by lumber imports from Canada.

Analysts say that the investigation lays the groundwork for potential new %Tariffs on Canadian lumber, notably softwood imports.

The investigation follows America placing blanket 25% tariffs on most goods imported from Canada, as well as a new 10% tariff on energy imports such as crude oil and natural gas.

Consequently, lumber futures on the Chicago Mercantile Exchange have risen 3.5% over the past day to trade at $657 U.S. per 1,000 board feet, the highest level since mid-2022.

However, while lumber prices are marching higher on the threat of U.S. tariffs, the stocks of Canadian lumber companies are tanking.

Shares of %Interfor Corp (TSX: $IFP ) fell 9% while the stock of %Canfor Corp. (TSX: $CFP ) declined 6% in Toronto trading on March 4, the day that the 25% tariffs went into effect.

Softwood lumber has been a contentious trade issue between the U.S. and Canada for decades, with the American industry accusing Canadian producers of dumping low-priced wood over the border.

Last summer, the U.S. raised its duties on Canadian lumber to 15%, a level that has put pressure on production and raised concerns about the future of some Canadian sawmills.

U.S. lumber production has risen in recent years, but America still relies on imports to meet demand.

About 30% of the softwood lumber consumed in the U.S. each year comes from Canada, according to America’s National Association of Home Builders.