Fur traders looking for alternate goods for the Canton market started the sandalwood trade. Chinese used the fragrant heart wood for incense, medicinal purposes, for architectural details and carved objects. Hawaiians were long familiar with the wood they called 'iliahi; seven species grew in the Islands. While trade in Hawaiian sandalwood began as early as the 1790s, it didn't take off until fur prices began to drop around 1810.
In 1811, an agreement between Boston ship captains and Kamehameha established a monopoly on sandalwood exports with Kamehameha receiving 25% of the profits. This agreement stood for only one shipment, though, and shortly thereafter the War of 1812 resulted in a British blockade of Hawai'i for two years. When a vigorous trade resumed in 1814, Kamehameha controlled it as a near-monopoly through the use of his agents. While a few individual chiefs also dealt directly with traders, it was not until the death of Kamehameha I that a wholesale pillaging of sandalwood forests took place. While Kamehameha I still held the reigns, he placed a kapu on young trees and no transaction was ever done on credit.
As trade and shipping brought Hawai'i into contact with a wider world, it also enabled the acquisition of Western goods, including arms and ammunition. Kamehameha used Western cannon and guns to great advantage in his unification of the Islands and also acquired Western-style ships, buying the brig Columbia
for a price of two ship loads of sandalwood in 1817.
After Kamehameha's death, his son Kamehameha II fell into debt with sandalwood traders. Having given away his own lands, he relied on the wood supplies of others, but he was unable to stop other chiefs from negotiating their own trade deals. By 1826, American traders were complaining about the debts owed by the king and chiefs and a general tax was imposed to pay off some of their collective debt. Traders played off the rivalry among chiefs to get the best price, ultimately accelerating the depletion of forests. The wood was sold by weight using a measure called a picul (133 1/3 pounds or about what a strong man could carry on his back). Traders made a profit of three to four dollars on each picul they bought in Hawai'i (at $7-$10) and then sold in Canton. As logging continued, wood quality degenerated and stands of sandalwood were harder to find. Natives set fire to areas to detect the trees by their sweet scent. While mature trees could withstand the fire, the flames wiped out new seedlings.
By 1830, the trade in sandalwood had completely collapsed. Hawaiian forests were exhausted and sandalwood from India and other areas in the Pacific drove down the price in Canton and made the Hawaiian trade unprofitable. Although forests were ravaged, sandalwood trees still survive today, tucked away on less accessible mountain slopes.