There has been a lot of discussion and controversy about the Canadian lumber tariffs and if they are actually affecting lumber business and consumers. These tariffs are additional duties put on softwood lumber coming out of Canada to the United States. Proponents for the tariffs have spoken out publicly saying that these tariffs are not impacting consumers and merely impose a purchase price adjustment for lumber companies that is not large enough to cause significant change.
This does not seem to be the case. The U.S. has been actively accusing Canada of subsidizing its lumber industry at the expense of American lumber companies and its consumers for years now. Canada harvests its lumber from public lands where as the United States harvests from primarily private lands. The Canadian government dictates the sales price of lumber in Canada and to exporting countries. Since the tariffs have gone into place Canadian wood prices are lower than what is charged to the U.S. The U.S. has been fighting this discrepancy because this eliminates a healthy marketplace competition leaving Canadian wood consistently cheaper than the U.S.
All tariffs, no matter what material it is on, fuels market volatility and forces companies to raise prices. This inevitably trickles down to small business and consumers. This is almost unavoidable here in America because one-third of U.S. lumber is brought in from Canada because our domestic supply cannot meet the demand.
Not only do these tariffs have significant economic impact, they are fostering underground cross-border saw mill purchases. This type of conduct will only to continue to bring about more unlawful and damaging business practices that will harm all parties
Lumber Tariffs and the Housing Market Recovery
Since 2008 the United States has been working to recover from the housing market crash that crippled many homeowners and builders. There have been many factors over the years that have led to a slow recovery. Those that analyze these issues often overlook the indirect impact that these lumber tariffs have on the housing economy. The National Association of Home Builders reported in 2017 that the tariffs were increasing the cost of a single-family home by at least $9000 (Cabe, 2018).
The quintessential American dream is to buy a home. The market crash forced many people out of their homes due to loss of net worth resulting in foreclosure. Now, roadblocks like these lumber tariffs are preventing Americans from buying their first home or moving up into larger homes. With lumber costing more than 24% more home builders are raising prices (Noel, 2018). The lumber industry, home builders, or consumers cannot absorb the economic impact that the tariffs are imposing.
Lumber Tariffs and the Global Impact on Colorado
Because the global economy is an interconnected web these lumber tariffs do not have a siloed effect. Colorado is peppered with thousands of small business that keep the local economies running. Because they are in the lower profit strata there is little room for a price influx on the materials they need to run their businesses and create their products. This means that lumber yards all the way down to the local contractor are feeling the financial effects of the tariffs forcing many of them to close down their businesses.
Help In Sight for Consumers Affected By Lumber Tariffs?
There is not a lot of hope for negotiations to end the lumber tariffs any time soon. Canada is reporting record revenues and knows that the U.S. cannot meet its lumber demand. And although it is not where is was before the crash in 2008 the American housing market is still improving and the demand for housing still ensuing. Canada is confident that it can continue to depend on the U.S. coming to them for lumber.
Several groups are forming to create new legislation and negotiations to put an end this battle. With the Trump administration supporting the tariffs, it is unlikely that propositions like the North American Free Trade Agreement between Canada, the U.S., and Mexico will be the resolution. This agreement like many before it is an agreement among the involved countries to ban tariffs and trade restrictions on all material imported and exported between them.
The U.S. will have to endure that tariffs for now and hope that opposing organizations will come up with some negotiating power.
Cabe, C. (2018). Did trump’s lumber tariffs make your new house more expensive? Retrieved from: Source.
Noel, R. (2018). Tariffs on lumber hurt U.S. home buyers. Retrieved from: Source.