The descendants of Joseph find themselves caught in a difficult position, trapped between a severe lack of living space and a distinct military disadvantage. When Joshua suggests clearing the mountain forests to expand their borders, they respond with a twofold argument that highlights the harsh realities of their terrain and their enemies.
First, they argue that the mountain region is simply not enough. The issue is not about physically locating the mountain, but rather about sufficiency [מצודת ציון, רש״י]. The territory of Mount Ephraim is entirely inadequate to support their large population [מלבי״ם, שטיינזלץ, מצודת דוד].
Expanding downward into the neighboring valleys to solve their overcrowding is equally problematic. The valley inhabitants possess overwhelming military strength, specifically iron chariots, making an offensive conquest entirely impossible [מצודת דוד, שטיינזלץ]. Although these local forces are technically from the Perizzite and Rephaim nations, they are referred to broadly as Canaanites because they all share a common descent from Canaan [רש״י]. These heavily armed enemies are stationed in Beth-shean and its surrounding towns, as well as in the Jezreel Valley. While the city of Jezreel itself belongs to the tribe of Issachar, the valley surrounding it was designated as the inheritance of Manasseh [מצודת דוד].
This military threat provides an additional reason for their refusal to clear the mountain forests. Beyond the fact that the cleared land would still not be enough for their needs, the forest itself serves a vital strategic purpose. They prefer to leave the trees standing to act as a natural barrier and defensive wall. This thick woodland separates them from the iron chariots in the valley, effectively preventing those powerful enemy forces from advancing up the mountain and destroying their settlements [מלבי״ם].