In the wake of the US decision to double the duty on softwood lumber imported from Canada, officials from various Canadian governments and the lumber industry are expressing their displeasure.
The U.S. Department of Commerce announced on Wednesday that it will proceed with the imposition of duties averaging 17.9 per cent on Canadian softwood lumber imports. That’s twice as high as the previous rate of 8.99%.
As recently as May, the US government said it would raise the rate to 18.32 per cent, but after further analysis over the summer it decided to lower that plan, but still double the levy.
According to the United States, subsidised Canadian lumber producers are dumping their products into the United States at a lower price than American lumber producers can because of the subsidies they receive. As a result, the United States imposes a tariff on all softwood lumber imported from Canada in order to raise its retail price, which encourages consumers to purchase American wood.
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After the United States imposes a 10% tariff on aluminium imports, Canada intends to retaliate “dollar for dollar.”
There have been numerous trade tribunals that have been found in Canada’s favour on this issue for a long time now.
Mary Ng, Canada’s International Trade Minister, said in a press release that she was “disappointed” by the decision, which found Canada to be a “fair trading partner.”
When it comes to high-quality building materials, “the United States has long relied on Canadian lumber products,” Ng said.
“These unjustified duties harm Canadian communities, businesses, and workers. At a time when housing affordability is already a major concern for many Americans, these regulations are also a tax on American consumers, raising the costs of housing, renovations, and rentals”
Not every piece of wood will be subjected to the same demands.
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Canadian softwood lumber exports to the rest of the world total about $8 billion per year, according to government data. The United States is the world’s largest purchaser of it.
The Canadian government, according to Ng, will continue to protect the industry from unfair tariffs, including through litigation under the North American Free Trade Agreement (NAFTA) and the World Trade Organization. The World Trade Organization (WTO) ruled in Canada’s favour on the matter as recently as the summer of 2020.
The United States claims that different companies receive varying levels of subsidy, so not all Canadian lumber will be subject to the same duty. In the end, the following are the final prices:
In total, 19.54 per cent of Canfor Corp.
An 11.12 per cent stake in West Fraser Timber Company
Resolute Forest Products Inc. has a 29.66 per cent stake.
JD Irving has a 15% share.
The 17.9 per cent rate will apply to all Canadian lumber producers.
Each of those rates has dropped slightly from the May proposal, but they are still significantly higher than they were before.
The British Columbia Lumber Trade Council argues that the tariffs are illogical because the United States does not produce enough softwood to meet its own demand for the product.
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According to official data, the United States only produces enough softwood lumber to meet about 70% of its own demand. Most of the rest of the supplies are shipped from Canada.
We hope that the US industry will end this decades-long litigation and instead work with us to meet the demand for the low-carbon wood products that the world wants, including American families,” stated council president Susan Yurkovich.
With the WTO ruling on softwood lumber, Canadian producers cheered but Americans slammed it.
As long as these unsubstantiated accusations persist, we will continue to vigorously defend our industry. ”
There are no acceptable tariffs, Alberta’s Agriculture, Forestry and Rural Economic Development Minister Nate Horner said.
Softwood lumber tariffs are having a direct impact on people in both countries:
Canadian lumber’s impact on U.S. tariffs
Three years ago, this was the case
There is no harm done to large Canadian mills, but smaller mills are starting to feel the effects. 2:24
Softwood lumber exports are unfairly targeted by any amount of tariffs, he said in a press release, adding that tariffs decreasing and then increasing create uncertainty on both sides of the border.
Blaine Higgs, New Brunswick’s premier, also voiced his displeasure with the decision. As he put it, “we are very disappointed with the United States government’s decision to increase these unfair and unwarranted duties against New Brunswick’s import of softwood lumber.”
U.S. softwood lumber tariffs will be increasing, putting pressure on mills in New Brunswick.
The U.S. lumber lobby group is pleased with the development.
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“We remain open to a new softwood lumber trade agreement if and when Canada can demonstrate that it is serious about negotiations for an agreement to offset the injury caused by Canadian unfair trade to US producers, workers, and timberland holders,” said the U.S. Lumber Coalition, the lobby group that represents industry interests in the country.
For the end-user, tariffs raise the price of lumber because importers typically pass them on to consumers when they purchase wood from a lumberyard. (CBC News/Robert Jones)
Before then, the U.S. Lumber Coalition supports the continued enforcement of the United States’ trade laws to combat Canada’s unfair softwood lumber practises.”
As a result of increased production by U.S. producers in recent years, the country now produces about 3.5 billion board-feet of softwood lumber annually, the group claims, even though the country has historically been unable to meet its own demand for the wood product.
As the group points out, “these increases have more than offset any decline in unfairly traded Canadian imports” (about 1.2 million single-family homes in the US).
The cost of a thousand feet of wood is $99.
Samir Patel, a CIBC analyst, estimates that for every thousand feet of softwood lumber Canada exports to the United States, an additional $99 in tariffs will be tacked on. That’s an increase from the current $54 price.
However, Patel thinks that the two sides will eventually come to an agreement that sees most of the tariff money returned, even though the dispute has gone on for decades.
In a note to clients, Patel wrote, “However, we do not expect a deal to materialise until late 2022 at the earliest (and more likely 2023 given the U.S. midterm elections next year).”
Protesters retaliate
The Federal Conservatives blamed Prime Minister Justin Trudeau for allowing the trade relationship with the United States to deteriorate, despite the fact that the dispute has been brewing for more than two decades.
Two Conservative MPs said in a statement that Canada’s relationship with the United States has deteriorated under Prime Minister Justin Trudeau, harming cross-border businesses and jeopardising jobs in the Canadian economy.
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However, “Trudeau’s approach has been to downplay these threats and sound hopeful but downplaying these threats and being hopeful is not a strategy to protect Canadian jobs.”
According to the international trade lawyer Lawrence Herman, unless Ottawa and Washington, DC., find the political will to work out a long-term solution for the lumber dispute, it will continue to be a source of friction.
It’s time to settle this once and for all, he said during an interview. “Canada and the United States are too important to be involved in these types of trade disputes.”
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