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A mini-trade war between the U.S. and Canada is set to send lumber prices higher.

At issue is the price Canadian foresters charge to cut down a tree, which is known as stumpage. The Canadians charge less than their U.S. counterparts, explains Kevin Mason, managing director at ERA Forest Products Research in Vancouver. U.S. producers believe the price is unfairly low and is undercutting U.S. lumber activity.

The immediate result of any new tariffs or trade restrictions would be reduced supply of wood to the U.S., where demand for housing lumber is likely to rise sharply. The effects have already spread from the outdoors to Chicago’s trading floors. Active-month contracts closed Friday around $337 per 1,000 board feet, up from around $338 at year end. But there’s potential for further gains as a tariff-free solution looks unlikely before a preliminary ruling set for April 24.

Traders can buy random-length lumber futures on the Chicago Mercantile Exchange. Investors might consider the Guggenheim MSCI Global Timber exchange-traded fund (ticker: CUT), which tracks a basket of lumber companies and is up more than 6% so far this year. Weyerhaeuser (WY), a lumber real estate investment trust, is another choice; it’s up more than 9% this year.

While U.S. foresters complain about pricing, Canadians claim there are other factors at work. In Canada, lumber companies are required to replant trees and repave roads if needed, Mason explains. That isn’t typically the case south of the Canadian border. “There is always a bit of apples and oranges in the comparison,” he says.

Regardless of the merits of the case, the broad outcome is pretty much a done deal. “The softwood lumber trade dispute will lead to either duties or taxes on imports of Canadian lumber by early May 2017 (we expect duties initially, with a tax-quota based deal negotiated in coming years),” states a recent report from ERA. “This will eventually lower Canadian supply to the U.S. market.”

WHILE U.S. LUMBER SUPPLY would increase to fill some of the shortfall, it won’t close the whole gap. The problem is that although higher prices should increase supply, there is a labor shortage in the southern U.S., which will hamper harvesting the trees, says Mason.

The demand side of the equation also argues for higher prices. Goldman Sachsforecasts housing starts to jump 9% this year, according to a recent report. “A 9% increase in housing starts would be a pretty meaningful bump in demand growth,” says Lila Murphy, co-manager of the Federated Prudent Bear fund.

A new, 2,400-foot single-family house typically would use 16,000 board feet of framing lumber and another 14,000 of other wood products such as plywood, according to the Idaho Forest Products Commission.

Sales of homes that have been lived in should also help lift lumber demand, with recent purchases “feeding demand for additions and other upgrades,” according to ERA. It’s Economics 101 that prices should rise when supply falls and demand increases.

“I think in the futures market, there could be a bit of sell the news, but at the same time there are tail winds lifting all commodities,” says Federated’s Murphy. Or put another way, the price trend is upward, but there may be a pullback.