New U.S. lumber tariffs derided as ‘shakedown’
Canada fears serious fallout for industry as Trump targets perceived trade barriers
U.S. Secretary of Commerce Wilbur Ross held up stiff new tariffs on Canadian softwood lumber as an example of the Trump administration’s willingness to crack down on unfair trade policies Tuesday, as Canadian companies and industry groups vowed to fight back against the “crippling ” measures.
The new import duties range from three per cent to 24 per cent, and apply to U.S.-bound shipments from Canadian forestry companies.
“This administration is much more enforcement-oriented than the previous one,” Ross said in an interview on Bloomberg Television, adding it would be proactive in targeting perceived trade irritants.
Canadian industry officials, meanwhile, dismissed the U.S. Commerce Department’s measures as posturing ahead of pending trade talks, calling the duties illegal.
“This move shouldn’t be seen as anything other than a shakedown,” said Duncan Davies, chief executive of Vancouver-based Interfor Corp.
Davies, whose company’s production is split between the U.S. and Canada, said the argument that Canadian timber is effectively subsidized is without merit.
“Log costs are significantly less in some regions of the U.S. than in Canada,” he said.
The dispute will have serious consequences for Canada’s lumber industry, which contributes about one per cent of Canada’s gross domestic product. After the lumber duties were announced, the Canadian dollar dropped nearly half a cent to 73.56 US cents, its lowest level in 14 months.
“If we look at the history of these trade actions, there inevitably will be job losses,” said Jim Carr, Canada’s federal minister of natural resources. “It is going to result in some tough times for some operators across the country.”
Prime Minister Justin Trudeau said Tuesday that “thickening ” the border is not in the interests of either country.
“We are tremendously interconnected in our economy with that of the United States, but it’s not just a one-way relationship,” Trudeau said. “There are millions of good U.S. jobs that depend on a smooth flow of goods, services and people back and forth across our border.”
In a preliminary ruling that will be finalized in September, the U.S. Commerce Department applied specific tariff rates to several companies: Canfor Corp., 20.26 per cent; J.D. Irving Ltd., 3.02 per cent; Resolute Forest Products Inc., 12.82 per cent; Tolko Industries Ltd., 19.5 per cent; and West Fraser Timber Co. Ltd., 24.12 per cent. All other Canadian producers shipping softwood lumber to the U.S. will face a blanket tariff of 19.88 per cent.
The Commerce Department also said it found “critical circumstances,” which means the tariffs will be implied not only immediately, but also retroactively by 90 days.
“The 90-day retroactivity is even more crippling,” said Jamie Lim, chief executive of the Ontario Forest Industries Association. Both the Ontario group and a Quebec group want the federal government to offer loan guarantees to lumber companies adversely affected by the tariffs. “That’s what we need right now to keep people working in Canada.”
The U.S. industry argues that Canada’s industry is subsidized because producers are able to source their timber on public lands.
Canadian companies deny any subsidies because they have to pay market-based stumpage fees to governments for the cost of logs. Lumber licences also require them to comply with environmental rules and to replenish the forest with new trees.
“It isn’t a freebie,” said Warren Mabee, director the Queen’s Institute for Energy and Environmental Policy in Kingston, Ont.
Susan Yurkovich, president of the B.C. Lumber Trade Council, said the U.S. trade measures are arbitrary and will ultimately hurt U.S. consumers because they will boost the cost of U.S. home construction.
The U.S. produced 32 billion board feet of lumber in 2016, but consumed 47 billion board feet. Canadian producers were needed to fill the gap and keep costs down for U.S. consumers, Yurkovich said.
“We now have this new trade action being driven by the same protectionist lumber lobby in the U.S. whose sole purpose is to create artificial constraints on Canadian lumber to drive up prices for their benefit at the expense of American consumers,” Yurkovich said.
The U.S. consumer argument doesn’t wash with Ross, who said the tariffs would add only 1.4 per cent to the average cost of a new U.S. home. “That’s not a very material number.”
The tariff finding is a preliminary one. A final determination is not expected until September. Meanwhile, more bad news could be on the way. In June, the U.S. Commerce Department is expected to issue another preliminary determination on Canadian softwood lumber, this one in response to alleged “dumping.”
The dispute represents the fifth time that Canada and the U.S. have locked horns over lumber since the U.S. government created the International Trade Administration in 1980.
In fact, trade lawyers are actually calling this round Softwood Lumber V. “These lumber cases have Roman numerals after them as if they were Super Bowls or movie sequels,” said Matthew Kronby, a trade lawyer with Bennett Jones LLP in Toronto.
There inevitably will be job losses. It is going to result in some tough times for some operators across the country.