What is the Impact of New Duties on Canadian Lumber?

Filed in Economics by on April 25, 2017 12 Comments

A new analysis by NAHB shows that more than 8,000 full-time jobs will be lost this year as the result of the decision by the U.S. Department of Commerce to impose a 19.88% duty on Canadian softwood lumber exports to the United States.

That’s in stark contrast to comments made by Commerce Secretary Wibur Ross that the new duties will have little effect on the cost of new homes.

Due to “special circumstances,” the duties will be retroactive 90 days from the date that the rates are officially published in the Federal Register, likely back to the beginning of February.

In this Eye on Housing blog post, NAHB senior economist Paul Emrath estimates that the annual impact of the 19.88% duty, if in effect throughout 2017, would be a loss of:

  • $498.3 million in wages and salaries for U.S. workers
  • $350.2 million in taxes and other revenue for governments in the U.S.
  • 8,241 full-time U.S. jobs

Many of the jobs are in construction, but the effects are not limited to a single industry, as wages and jobs are also lost in businesses that sell and transport building materials, provide architecture and engineering services, etc.

Some jobs are gained in the U.S. sawmill industry, but this is almost entirely offset by losses in other manufacturing industries. In total, 25 or more jobs are lost in 31 different detailed (6-digit NAICS code) industries.

These losses of wages, jobs and taxes are net losses that take the increases in wages, jobs and taxes in the domestic sawmill industry into account. Jobs are measured in Full Time Equivalents (enough work to keep a worker employed full-time for a year).

The analysis is for calendar year 2017, assuming that some of the impacts have already occurred as markets have anticipated the Commerce Department announcement.

“NAHB respectfully disagrees with comments made by Commerce Secretary Ross that the tariffs on Canadian lumber imports into the U.S. will have little effect on the cost of housing,” said NAHB Chairman Granger MacDonald Tuesday. “While Ross cannot cite specific consequences regarding this punitive tariff, we can.

“Clearly, protectionist measures to prop up domestic lumber producers at the expense of millions of U.S. home buyers and lumber users is not the way to resolve the U.S.-Canada trade dispute or boost the U.S. economy.

“As an industry that is on the front lines of this issue, NAHB would be happy to discuss this matter with the White House and seek solutions that will not harm housing affordability for millions of hard-working American families,” MacDonald said.

CNBC also broadcast a story citing NAHB statistics and quoting MacDonald, who said the tariffs are “short-sighted” and will “harm consumers and housing affordability.”

View further analysis in this Eye on Housing blog post.

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  1. Robert says:

    While I don’t want to criticize the NAHB, I would like to point out that the Canadian Government subsidizes their timber industry. As a landowner and timber producer, we have been below market for the real cost of timber for over 20 years. If the US Government opened the National Forests to proper timber management practices that may help. Sawmills and production companies provide jobs also. Their has to be a balance and Canada dumping timber is the US is not good for our economy.

    • Tom says:

      Robert, the issue with your argument is that when you say it’s not good for our economy, you mean it’s not good for the timber industry. According to the BLS, the timber industry employs ~40,000 people. This duty being imposed by the administration will affect the NAHB members as well as millions of home owners, buyers, construction companies and home renovators. Will these duties create over 9,000 jobs to offset those lost according the the NAHB and create enough value in the economy to offset the hundreds of millions lost to increased prices?

      • Ron Jones says:

        Tom, while you make valid points it must also be noted that no one is more practiced at using the “bad for the economy” argument to advance its own special interests than the building industry.

        For as long as lumber pricing has been a hot issue we have been ignoring the more important question which is when/how do we move away from stick built home construction into more resource efficient, higher performance building systems that move us away from our reliance on dimensional lumber regardless where it comes from?

        If the industry and the organizations that advocate for it focused as much energy and other resources on improving the end product rather than fighting unpopular policy we would all be miles ahead, especially those home buyers will like to claim we represent.

        • The home building industry drives the economy. The special interests I see are the mfg who are constantly lobbying to change the building standards to promote their products which drive up costs. Over the years I have seen so many of these products dont work and have to be withdrawn. We deal w over-regulation from EPA and OSHA which drives up cost. Of course there is WOTUS in the background.
          You want to move from stick built to resource efficient etc and again typically at a higher cost. I still believe a well managed foresting system is a great option for those who appreciate traditional framing in which you get a “solid” house.

          • Ron Jones says:

            Sorry but this blame-game, excuse-making type thinking should have never made it past the turn of the century and is largely why so much of the industry has fallen behind while other sectors have flourished.

            The builders who have moved on past this obsession with the first cost equation will lead the way forward for the rest of the industry while those who insist on continuing to deliver an outdated product predicated on 1950’s building practices will fall further and further behind.

  2. Ricky Wendel says:

    We need to get these results of this effect to President Trump, for sure he can help the farmers in better a way now that he has Canada. Attention on this issue. Destroying another industry to possible help another industry does not help our economy at the end of the day. President Trump being in the building industry had to realize signing this Executive Oder would hurt the building industry, and after Eight years of Obama’s rules and regulations we do not need anymore regulation to make home builders prices go up on building a structure, residential of commercial. We need to work with President Trump to work out a resolution that will help the farmers and builders equally. Builders have had enough bad times due to our last eight years with Obama. Help the Builders President Trump.

  3. If this tariff is a precursor to opening logging in the United States wouldn’t that be good? I understand that would take some relief from the OVER regulation in that industry to open this market. We need NAHB to be our advocate at the White House.

  4. John Wilson says:

    This is what happens when you have an uninformed person making knee-jerk decisions because he thinks everything has a simplistic solution. Trump has little scope to deal with multi-dimensional problems. You guys at NHAB helped elect him, now he’s your problem. He is probably saying your analysis is “fake news.”

    Look, there are far better ways to create a level playing field for lumber producers in the US. The tax system has been used for years to help deal with these issues (which is one reason why it is so complex–wait till that one goes away too). A comprehensive, long term systematic approach is what is needed including incentivizing producers of alternative building systems to make their products more financially viable (like a tax credit for purchasers of new homes & buildings that are constructed with less commoditized products, i.e. substitutes dimensional lumber), or providing tax relief to producers who face subsidized lumber from Canada, etc.

  5. Lindal Cedar Homes for ex. ( cedar only comes from Canada, western red) has built approx 60,000 homes in 70 years. Moved to US in 1966. I personally as a distributor have put 195 homes (complete build job) in my impoverished state and Md n Va. These are high-end cost homes but add valuable tax revenue to the states as most are weekend, resort n primary transplants from city, i have fed hundreds of families in the process (trades) n local building supply houses for all other non-wood components This materisl is healthy, does not off gas and is hurricsne and tornado resistant, has a life expectancy of 300 years n a lifetime warranty on the homekit , While it is not the answer to mass housing, it has its niche. It is popular in 9 other countries and the foremost Building system used in north America sense settlers. Why do you invalidate this product which cannot be replaced for the fast growing yellow southern with less dimension strength, durability, building stability?

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