Builders Say Canadian Lumber Tariff Will Be Costly for Homebuyers and Economy

John Jordan | April 2017

WASHINGTON—The Trump Administration’s decision earlier this week to impose tariffs or duties on Canadian imported lumber could have significant impacts on prospective new homebuyers as well as the U.S. economy, the National Association of Home Builders warns.

Earlier this week, the Trump Administration announced it was imposing tariffs on imported Canadian lumber ranging from 3.02% to 24.12%. Five Canadian lumber firms will be charged the new tariffs—West Fraser Mills, Tolko Marketing and Sales, J.D. Irving, Canfor Corp., and Resolute FP Canada. West Fraser Mills will pay the highest duty of more than 24%. All other Canadian lumber companies are now charged an approximately 20% tariff on exports to the U.S., according to published reports.

U.S. Secretary of Commerce Wilbur Ross states, “It has been a bad week for U.S.-Canada trade relations. Last Monday, it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States. Today, in a different matter, the Department of Commerce determined a need to impose countervailing duties of roughly $1 billion on Canadian softwood lumber exports to us. This is not our idea of a properly functioning Free Trade Agreement.”

The Trump Administration charged that the tariffs were imposed to level the playing field between American and Canadian lumber companies. The Commerce Department stated that it has preliminarily determined that exporters of softwood lumber from Canada receive subsidies of 3.02% to 24.12%. Last year, imports of softwood lumber from Canada were valued at an estimated $5.66 billion.

Canada’s Minister of Foreign Affairs, Chrystia Freeland, and Natural Resources Minister Jim Carr said in a joint statement, “The Government of Canada disagrees strongly with the U.S. Department of Commerce’s decision to impose an unfair and punitive duty. The accusations are baseless and unfounded. This decision will negatively affect workers on both sides of the border, and will ultimately increase costs for American families who want to build or renovate homes.”

The National Association of Home Builders came out strongly against the Canadian lumber tariffs. “NAHB is deeply disappointed in this short-sighted action by the U.S. Department of Commerce that will ultimately do nothing to resolve issues causing the U.S.-Canadian lumber trade dispute but will negatively harm American consumers and housing affordability,” says NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, TX.

Thirty-three percent of the lumber used in the U.S. last year was imported. More than 95% of the imported lumber came from Canada.

“This means that imports are essential for the construction of affordable new homes and to make improvements on existing homes,” says MacDonald.

NAHB notes that the trade agreement governing Canadian imports of softwood lumber since 2006 effectively expired at the end of 2016. The association blames uncertainty surrounding a new trade pact as the primary catalyst for the 22% increase in the Random Lengths Composite Price Index for lumber since the beginning of the year. The price increase has raised the price of a typical single-family home by $3,600.

“If the 20% lumber duty remains in effect throughout 2017, NAHB estimates this will result in the loss of nearly $500 million in wages and salaries for U.S. workers, $350 million in taxes and other revenue for the governments in the U.S. and more than 8,200 full-time U.S. jobs,” MacDonald says.

NAHB urged the U.S. and Canada to work cooperatively to achieve a long-term trade agreement. The association also seeks to increase domestic lumber production by seeking higher targets for timber sales from publicly-owned lands and opening up additional federal forest lands for logging in an environmentally sustainable manner. NAHB also calls for the reduction of U.S. lumber exports.

“Taking these steps to meet our nation’s lumber needs is essential because tariffs needlessly increase the volatility of the lumber markets, resulting in higher prices for U.S. home buyers and other consumers and businesses who use lumber,” says MacDonald.

John Jordan
Editor, Real Estate In-Depth