In 2016, towards the end of the Obama administration, the American timber industry petitioned the government to impose tariffs on Canadian softwood imports in response to allegedly unfair trade practices. The process continued under the Trump administration, which imposed tariffs of 20.2 percent on most Canadian producers in 2017. Last year the quota was reduced to 9 percent.
The status of the long-running dispute took on a new urgency as timber prices skyrocketed last year. The National Association of Home Builders estimated in April that higher timber costs would have increased the price of an average newly built single-family home by nearly $ 36,000. A benchmark for the price of frame wood hit a record high of $ 1,515 per thousand board feet in May, four times the price at the beginning of 2020 before it started to fall. Last week the price was $ 930, still more than double what it was at the beginning of 2020, according to Fastmarkets Random Lengths, the specialist publication that publishes the benchmark.
“As an economist, it is very difficult to understand why we tax something that we do not produce enough of,” said Robert Dietz, chief economist of the National Association of House Builders.
On the other side of the problem are US lumber producers. The US Lumber Coalition, an industry group, has argued that strong demand, not tariffs, drives timber prices and that tariffs are only a small fraction of the total cost of timber for new homes.
The coalition attributes the tariffs to strengthening the US timber industry and says in a statement that American sawmills have expanded capacity in recent years and produced an additional 11 billion board feet of timber since 2016, a direct result of trade enforcement, and the US industry urges the government to continue this enforcement, “said the coalition.
Dustin Jalbert, senior economist at Fastmarkets, a pricing information company, largely attributed the chaotic timber market and high prices to the effects of the pandemic. At the beginning of the pandemic, he said, sawmills “assumed the worst” and cut production just to allow the housing market to recover and demand to rise.
Mr Jalbert said the tariffs from the dispute between the US and Canada are not a primary reason for the high prices. “In terms of short-term pricing, it’s lower on the list in terms of the factors driving the record prices we’ve seen in the market,” he said.