Tariffs on Canadian Softwood Lumber Hitting U.S. Homebuyers Hard

COMMENTARY Trade

Tariffs on Canadian Softwood Lumber Hitting U.S. Homebuyers Hard

May 18th, 2021 2 min read

Commentary By

Patrick Tyrrell

Research Coordinator

Anthony B. Kim @akfreedom

Research Manager and Editor of the Index of Economic Freedom

Jared Feltman bundle lumber on the forklift at Adams Lumber Company in Centennial, Colorado on Tuesday, May 4, 2021. Hyoung Chang / MediaNews Group / Getty Images

Key Takeaways

The tariffs—dubbed “countervailing duties”—are meant to protect the U.S. lumber industry from what they claim are unfair Canadian subsidies.

The result is suppressed activity in the U.S. homebuilding industry, fewer construction jobs, and fewer options for homebuyers, who may be forced to settle.

Lingering protectionism, as shown in the Canadian softwood lumber case, threatens to undermine much-needed greater economic dynamism. 

Lumber prices have gone through the roof over the past year—up 370%.

The lumber needed to build a new home now costs nearly $36,000 more than just 12 months ago.

The reasons include lower production levels at U.S. sawmills when the pandemic was raging, high demand for new homes as millennials enter the peak homebuying age group, and increased use of lumber by do-it-yourselfers on home improvement projects as they spend more time in their homes.

One thing the government can do to inject relief is remove the tariffs on Canadian softwood lumber (9% since last December; 20% before that).

According to proponents, the tariffs—dubbed “countervailing duties”—are meant to protect the U.S. lumber industry from what they claim are unfair Canadian subsidies.

Timber harvested from Canadian government land, for example, can enjoy a price advantage over U.S. timber grown on private lands. What’s not clear, however, is why the government should require U.S. consumers and homebuilders to bear the burden of supporting U.S. growers who can’t compete.

The result is suppressed activity in the U.S. homebuilding industry, fewer construction jobs, and fewer options for homebuyers, who may be forced to settle for smaller homes, or ones with fewer amenities.

Some families who would otherwise buy a new home opt to buy older homes. Others stay in their current homes longer.

U.S. Trade Representative Katherine Tai is meeting with her Canadian and Mexican counterparts this week to discuss what progress is being made under the new North American trade agreement, and U.S. homebuilders and many lawmakers want her to remove the tariffs on Canadian softwood lumber.

White House chief economist Cecilia Rouse said Friday the Biden administration is “weighing concerns about commodity shortages and inflation as it reviews trade tariff policy.”

Given the high and growing demand for lumber to feed pent-up demand in the U.S. homebuilding sector, it would be beneficial for both the U.S. and Canada to reach a permanent agreement on softwood lumber imports from Canada that allows trade to flow unimpeded.

From a broader perspective, it should be noted that Canada and the United States have a profound and multifaceted partnership and alliance, strengthened by shared values and interests. Protectionist measures are a drag on our mutual economic recovery from the ongoing pandemic and progress toward greater prosperity.

Indeed, lingering protectionism, as shown in the Canadian softwood lumber case, threatens to undermine much-needed greater economic dynamism.  

A recent Wall Street Journal editorial made a timely and strong case against the tariffs on Canadian softwood lumber, noting:

Canadian lumber can provide a safety-valve for supply amid U.S. shortages, but not since the tariff. … This backward-looking assignment of duties introduces enormous uncertainty, creating an incentive to rely on domestic supply.

President [Joe] Biden said as a candidate that he opposes the Trump tariffs on allies. How about killing this one to help American homebuyers?

Let’s hope Tai gets that message.  

This piece originally appeared in The Daily Signal.