Tariff on Canadian softwood lumber
It’s the latest salvo in a trade war, one that’s been going on for quite a while:
U.S. President Donald Trump intensified a trade dispute with Canada, slapping tariffs of up to 24 percent on imported softwood lumber in a move that drew swift criticism from the Canadian government, which vowed to sue if needed.
Trump announced the new tariff at a White House gathering of conservative journalists, shortly before the Commerce Department said it would impose countervailing duties ranging from 3 percent to 24.1 percent on Canadian lumber producers including West Fraser Timber Co.
“We’re going to be putting a 20 percent tax on softwood lumber coming in — tariff on softwood coming into the United States from Canada,” Trump said Monday, according to a tweet by Charlie Spiering, a White House correspondent for Breitbart News. A White House official confirmed the comment.
The step escalates an economic battle among neighboring countries that normally have one of the friendliest international relationships in the world. It follows a fight over a new Canadian milk policy that U.S. producers say violates the North American Free Trade Agreement.
“Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!” Trump said in a tweet Tuesday morning.
This really is a longstanding issue:
Since the early 1980s, the U.S. has argued with Canada over how much softwood lumber the country’s suppliers can sell in the U.S. and at what price. The two nations have negotiated temporary agreements in previous years over softwood, which comes from trees that have cones, like pine or spruce, and is preferred by builders for constructing home frames.
But hammering out a new deal has been slow-going for the Trump administration, which still doesn’t have its chief trade negotiator in place.
“Hammering out a new deal”—nice metaphor for building with wood.
The lumber industry in the States is in a strange State of flux. Mead Westvaco has split up, and the Mead family irking of it’s stands of timber in the southeast. Most of it is becoming subdivisions. Plum Creek bought some, but there since been bought out by someone else. Large diameter timber is being shipped to India to be milled — and it is the finishing off the late diameter lumber that makes money and jobs.
We’re still screwed.
Interesting that the media and politicians have not jumped on this issue.
Protectionism is probably one of the least desirable aspects of DJT’s big government “populism”. Most people realize that BATs and tariffs just shift the tax burden and favor selected industries. History has proved that while raising barriers to “unfair” cometition sounds apealing, such policies ultimately do not protect/create jobs, or result in greater prosperity.
One has to wonder if DJT and team really believe their rhetoric or if achieving free trade is a negotiation chip ala backing off on “China’s currency manipulation” to get their cooperation on North Korea. That said, setting an example by publicly getting tougher with Canada does not seem to be the best place to start.
There was no NAFTA in the 80’s but it has been a longstanding trade dispute, and at the heart of the dispute lies in how the majority of softwood lumber is managed in Canada. Most of our forests are on ‘Crown’ (government) land and is leased over long terms. The leaseholder also has to replant and what was harvested as part of their costs.
What was the prevailing price 10 years ago maybe ‘dirt’ cheap today — or not — depending on market factors and the prevailing rate of currency exchange. I know in New Brunswick lease terms are usually over 21 years…other provinces may have longer or shorter terms.
In the US — the majority of forests are harvested on private land with short-term agreements. Factor in the fact we are geographically a large country with lots of wood and a low dollar and well, so it goes.
As a Canadian, I am more than a little trifle fed up with the US attitude in the softwood lumber dispute. It’s gone so many times to arbitration by so-called neutral parties, and we have won our case consistently, and I have no doubt we will win again in arbitration, but well, why bother? I am ready to walk away from NAFTA.
And that Dairy issue — here’s some background.
http://business.financialpost.com/news/agriculture/fact-check-is-u-s-president-donald-trump-right-to-be-cheesed-off-at-canadian-farmers
Nailed it!
This is protection of a favored industry at the expense of the rest of us. Soft wood is an integral part of housing, and the net result of this will be to make housing more expensive, producing less of it due to affordability, and/or reducing the ability of the consumer to maximize the utilization of their money/resources. There is no record of the economic benefits of a punitive tariff such as this ever outweighing the economic loss to the public in general. If it’s such a great idea, why not tariffs on items purchased in one state originating in another?
This determination that Canada was dumping lumber was made by the Obama administration.
From the Wood Markets website:
“On January 9, 2017, the US International Trade Commission (US ITC) ruled on its Preliminary Determinations regarding injury from the imports of softwood lumber products from Canada. The U.S. Department of Commerce (DOC) is to continue conducting its countervailing (CVD) and antidumping duty (ADD) investigations on U.S. imports of lumber from Canada and to recommend export duties.”
“On Thursday May 4, 2017, 2017, the DOC’s Final Determination on a countervailing duty determination is due — the same day its preliminary antidumping duty determination will be announced.
The results of these investigations will trigger market chaos, as Canadian mills will need to try to dramatically increase U.S. lumber prices to counter the effects of punitive export duties. A combined duty of 30+% is now expected and the impact of the duty is expected to cause some Canadian mills to curtail and even close permanently.”
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Yes this has been going on a long time. The decision to implement punitive tariffs is being made by the Trump administration, but from the investigation by the Obama administration.
It takes the wisdom of Solomon to create win – win trade deals. Especially when they are between two countries with different currencies. Three years ago the Canadian Loonie was on a tear because of the high price of oil. As the Loonie has declined with oil prices, I’m sure the price of softwood was forced down. Lumber companies in Canada would then like to sell more lumber to make up the difference. Hence the charge of dumping. As oil and lumber prices decline, the Canadian dairy farmers need protection from competition south of the border. So, they raise import duties or refuse to buy milk from the U.S.
Yes, the dairy industry here has had a huge over production problem. And it has been exacerbated by government subsidies. What our dairy industry has failed to do is to search for new markets outside of North America. New Zealand is an example of a country that was once highly dependent on wool exporting and sheep husbandry. As wool became too expensive demand dropped and demand for cotton and man-made fabrics increased, New Zealand had to find a new product to export. That product was dairy products. Dairy exports (powdered milk, cheese, whey powder, and butter) are now the back bone of their export economy. They actively sought new markets and now export to East Asia and Africa as well as Great Britain and Australia, their long term trading partners.
The best way to protect home grown industries is to have low taxes, easy access to capital, and sensible regulation. Tariffs create imbalances and ill feelings along with unintended consequences.
I think Trump is wrong in this move. We’ll see.
One hint about the ongoing blog glitch:
I’ve discovered that if you force a cache refresh by pressing CTL + F5, you can usually make the blog display the comments and the posts properly. Let me know if you see the most recent posts when you do that.
All you computer experts or semi-experts out there, do you have any advice for fixing things, based on this new information? I’m still getting professionals to help, but they’re taking longer than I’d like.
Trum, if you are going to hammer a bordering country over trade bullsh, at least have your negotiator and inquisitors in place. At least pretend to be competent.