Raising Softwood Lumber Tariffs Will Hurt Americans and Canadians Both
Dec 9th, 2021 3 min read
Tariffs act as a tax on consumers and exacerbate price volatility. Lumber prices skyrocketed this past year.
KEY TAKEAWAYS
With housing affordability threatened, American home builders are asking the Biden administration to temporarily lift tariffs on building materials.
Jacking up duties on Canadian lumber will result in thousands of job losses on both sides of the border,
The lumber tariff increases will hit American consumers hard, as lumber costs today remain nearly double what they were pre-pandemic.
House prices are 20% higher than they were a year ago due to lingering supply chain issues, increased cost of materials and labor shortages. With housing affordability threatened, American home builders are asking the Biden administration to temporarily lift tariffs on building materials such as steel and lumber from China and Canada.
Duties on Canadian softwood lumber have gone on quite a ride in recent years, rising to 20.2% in 2017 and then settling down to 8.9% last year. However, this May, the U.S. Commerce Department announced it was taking steps to boost tariffs on Canadian softwood lumber imports once again. In late November, the Commerce Department reported that the average tariff will double, back up to 17.9%.
>>> Global Trade Freedom Has Declined for the Fourth Straight Year
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These tariffs act as a tax on consumers and exacerbate price volatility. Lumber prices skyrocketed this past year, adding almost $36,000 to the cost of a new single-family home. Factor in ongoing supply chain issues, and it’s no surprise homebuilding has slowed. The gap between houses under construction and completed houses was the largest on record in September.
Ultimately, these duties benefit only American lumber producers, who seek to protect their market share. For decades, they have accused Canadian producers of “dumping” their lower-priced lumber in the U.S., and every time, international trade arbiters have cleared Canadian lumber producers of the charge. Moreover, the U.S. International Trade Commission has found that Canadian lumber imports are not a threat to the American industry, so there’s no justification for slapping duties on them.
American lobbyists are good at getting what they want, but tariffs are a lousy way to treat any trading partner, much less a close friend and ally. They do no favors for this country either. Jacking up duties on Canadian lumber will result in thousands of job losses on both sides of the border, whether it’s American home builders or Canadian sawmill workers. These individuals should not be put out of work just to line the pockets of U.S. lumber producers—especially now when both economies are grappling with the economic fallout from the coronavirus pandemic.
When thinking of home builders, it’s easy to picture large developers. Still, most National Association of Home Builders members start 10 or fewer homes per year, and about half of them have five or fewer employees. In other words, it’s mostly small employers, not faceless corporations, that are suffering. And with governments tending to impose tariffs on materials that go into life’s necessities, like food, clothing and shelter, it’s everyday consumers who are hurt the most.
It’s no surprise, then, that countries with fewer trade restrictions are more prosperous than those that restrict trade. According to the Heritage Foundation’s latest annual Index of Economic Freedom, the United States isn’t even in the top 10 freest economies in the world. In fact, at number 20, there’s a lot of room for improvement if the Biden administration is looking for something useful to do.
To be fair, at the recent G20 summit, the U.S. president announced plans to ease tariffs on steel and aluminum coming from the European Union. Commerce Secretary Gina Raimondo expressed confidence that the move will ease supply chain pressures, drive down cost increases, and be beneficial for American manufacturers who use these materials in their products.
The move is also expected to ease some tension on the strained trans-Atlantic relationship between the U.S. and the EU nations. But what about the relationship with Canada? And what about cost relief for millions of American homebuyers? The lumber tariff increases will hit American consumers hard, as lumber costs today remain nearly double what they were pre-pandemic.
>>> Tariffs Are Never a Good Idea. Those on Aluminum Are Especially Bad.
President Biden has committed to trade policies that protect and empower American workers. Well, in 2019, more than 4.4 million Americans made their living in residential construction. These jobs—and the dream of homeownership for many Americans—are directly attacked by import duties. Moreover, as a recent Wall Street Journal editorial noted, this type of measure flies in the face of the Biden administration’s expressed desire to fight inflation.
Canada and the U.S. remain strong allies and crucial trading partners in our uncertain world. In 2019, Canada was the third-largest exporter of goods to the U.S. and the second-largest supplier of agricultural products. And it goes both ways—Canada is also the second-largest export market for American agricultural products.
The Biden administration should roll back tariffs on softwood lumber from Canada as it has done with steel and aluminum. There are enough economic and trade troubles in the world today. The mutually beneficial Canada-U.S. relationship should not become one of them.
This piece originally appeared in The Washington Times
Commentary By
Michel Kelly-Gagnon
President and CEO of the Montreal Economic Institute (MEI)
Anthony B. Kim@akfreedom
Research Fellow and Editor of the Index of Economic Freedom