Canada-U.S. drywall clash causes ‘chaos’
New trade dispute emerges after gypsum board price hike from tariff
A new trade dispute has broken out between Canada and the U.S. that threatens to raise prices in Canada’s already overheated housing markets.
The Canada Border Services Agency imposed a provisional tariff as high as 277 per cent on U.S. drywall imports in September after ruling that manufacturers were dumping the product, or selling it below the price in their home market, undercutting local suppliers.
The tariff has raised the price of drywall, or gypsum board as it’s also called, by as much as 30 per cent and is causing “chaos” and delays as contractors scramble for alternative sources.
Some builders say the tariff could add as much as $13,000 to the cost of a new home, which would amount to a $2.6 billion increase to the roughly 200,000 homes built in Canada each year.
“Nobody’s going to be happy about being told there’s a significant price increase,” said Nathan Stone, 36, a builder based in Chilliwack, B.C., whose company, Odessa Group, erects about 50 homes a year. “They’ve created a highly punitive tariff where it’s completely impossible to buy U.S. drywall.”
The drywall spat is the latest irritant facing Canada and the U.S. as they try to forge a new crossborder relationship under Donald Trump, who was elected U.S. president on a promise to toughen up trade deals. Canada and the U.S. are already embroiled in a dispute over softwood lumber.
The two countries failed to agree on an accord in October that would have allowed tariff-free imports from Canada, and U.S. firms are now lobbying to cut Canada’s share of its market.
“It’s certainly interesting this has come in amid the lumber-trade dispute,” said Bob Finnigan, president of the Canadian Home Builders’ Association and a principal of real estate developer Heron Group of Companies. “This is the issue our entire industry is focusing on now. It has the potential to affect billions of dollars of building contracts.”
Canada Border Services, which will issue a final report on the dumping on Dec. 5, and the Office of the U.S. Trade Representative declined to comment on the tariff.
Finance Minister Bill Morneau has asked the Canadian International Trade Tribunal to fast-track a study on the impact of the duties.
The study is due by Jan. 4, the same day the tribunal issues a final ruling on the tariff. Morneau has final say on what duties are applied.
“Ensuring fair trade practices is important, but delays in reconstruction are a serious concern,” Morneau said in the House of Commons last month.
“That is why I have asked the Canadian International Trade Tribunal to investigate whether or not tariffs are in the public interest immediately, instead of after its final determination is made.”
In Alberta, construction companies are trying to rebuild Fort McMurray after the wildfires. Canadians are also facing soaring house prices in many cities, especially in Toronto and Vancouver.
Canada imported about $277 million worth of lime and gypsum products last year, about 97 per cent of it from U.S. manufacturers, according to Statistics Canada.
“It’s causing chaos in the market,” Cyndee Todgham Cherniak, founder of LexSage, a law firm in Toronto that specializes in international trade law, said by phone Nov. 21.
Her firm is representing one of the U.S. manufacturers slapped with the tariff. “There are examples of issues where people can’t get drywall. So then painters can’t paint the wall, installers can’t install lights, can’t install kitchen cabinets, or the countertops.”
The tariff was imposed this year after Canada’s largest drywall maker, CertainTeed Gypsum Canada Inc., filed a complaint to border services in April that they were being injured due to U.S. dumping. The department launched an investigation with an initial finding that the foreign firms were, indeed, dumping.
U.S. companies have been selling product in Canada at as much as half the price they sell it south of the border, according to Matt Walker, general manager of Mississauga, Ont.-based CertainTeed Gypsum Canada, which threatens CertainTeed’s three production facilities and about 200 jobs in Canada.