Lumber industry braces as U.S. expected to slap tariffs

A decade-long ceasefire in the U.S.Canada softwood lumber war ends Tuesday.

The U.S. Commerce Department is expected to slap a preliminary countervailing duty of between 20 and 40 per cent on Canadian lumber shipments, in response to a complaint from U.S. lumber producers. They say Canada unfairly subsidizes its industry because producers in British Columbia, Alberta, Ontario and Quebec are able to source their timber from public lands.

“If history is any prediction, you’ll probably see those tariffs imposed on Tuesday,” said Brenda Swick, an international trade lawyer in Toronto with cross-border law firm Dickinson Wright LLP.

The U.S. market takes more than 70 per cent of Canada’s lumber exports. In the 12 months through February, Canada shipped $16-billion worth of lumber south of the border. Lumber makes up a quarter of Canada’s non-energy exports.

U.S. lumber producers have long accused Canada of subsidizing its industry, something it has always denied. The two countries put their disagreements on hold in 2006 when both countries agreed to a nine-year ceasefire on trade litigation. The agreement expired on Oct. 12, 2015, but an automatic one-year standstill kept trade lawyers at bay until November 2016.

The dispute took a sharper turn last week when U.S. President Donald Trump said Canada’s trade practices on lumber are unfair.

The Commerce Department’s tariffs will be considered preliminary. A final determination could come in about 90 days. Meanwhile, the Commerce Department is also expected to release a preliminary report on June 23 on whether Canadian companies are allegedly “dumping” lumber on the U.S. market.

According to the Montreal Economic Institute, a non-partisan think tank, more than 24,000 Canadian jobs depend on softwood lumber exports. Alexandre Moreau, an analyst with the institute, said a 25 per cent tariff would raise the average price of a new U.S. house by $1,300.

“The case of softwood lumber is a perfect illustration of how protectionism generally provides benefits for a small number of people while harming a majority, and American consumers are not exempt from this logic,” Moreau said.