With the Canadian dollar hovering below $0.70 U.S., Canada’s forestry industry is getting some much needed help, but storm clouds could be on the way.

The Canada-U.S. Softwood Lumber Agreement, which kept trade peace between the two countries, expired last October, and U.S. timber producers have already been fighting against its renewal.

Industry analyst Naomi Christensen, with the Canada West Foundation say cheaper Canadian wood will only further that effort.

“The fact that the low Canadian dollar is good for Canadian companies that are exporting into the U.S. is probably going to probably ignite those protectionist fires in the U.S. fires, unfortunately.”

Even if a new deal is struck, Christensen says the low dollar could still hurt Canadian lumber producers in negotiations.

“One thing that may happen is that the dollar could somewhat affect Canada’s bargaining position at the table – for example if the U.S. were arguing for higher export tariffs than were in the last agreement.”

Christensen says American producers are already working to use U.S. trade laws to offset Canada’s advantages once a one-year n0-tariff clause from the SLA expires.

She says the best thing Canadian producers can do is to diversify their export markets.