Biden is hiking lumber tariffs at the wrong time
President Joe Biden said this week he has “used every tool available to address the price increases” that have pushed inflation to a 30-year high. Not quite. One factor pushing up costs is the higher tariffs that President Donald Trump imposed on many imports. Yet instead of scaling them back, the Commerce Department just doubled the average tariff on Canadian softwood lumber from 8.99 percent to 17.9 percent.
The announcement came the day before Thanksgiving while Americans were otherwise occupied - almost as if the administration were trying to hide it.
This lumber tariff increase on one of America’s closest allies is particularly ill-timed and misguided. All of this is happening just as Biden is advocating for the biggest investment in decades in affordable housing in his Build Back Better plan. The stiffer duty will almost certainly lead to higher prices for new homes and heftier fees for renovating kitchens, decks and more.
Nor does the U.S. lumber industry need extra protection right now. Anyone involved in construction or who has attempted a do-it-yourself project during the pandemic knows that lumber costs have skyrocketed lately. Prices hit their highest level ever in May of more than $1,600 per 1,000 board feet. Though prices have fallen since then, lumber is currently selling at $800 per 1,000 board feet, which is about double the 2019 price, giving a significant boost in profits already to U.S. lumber companies.
The United States only produces about 70 percent of the lumber it needs, meaning the rest has to be imported from somewhere, notes Daowei
Zhang, professor of forest economics at Auburn University. Canada has been the top foreign supplier for years, providing about 28 percent of U.S. needs, according to the Congressional Research Service.
The lumber wars between the United States and Canada date back to 1982. Most of the logging in Canada occurs on government land, and the United States has long accused Canada of subsidizing its lumber industry by setting low fees to cut down trees in some areas. Canada pushes back that these are not subsidies, and international trade tribunals have tended to agree with the Canadians.
Still, Congress came up with a convoluted process of requiring the Commerce Department to evaluate Canadian lumber prices and subsidies annually and recommend penalties. The result is that tariffs on lumber can swing wildly from year to year. In 2006, George W. Bush negotiated a deal with Canada that put a clear policy in place for about a decade that imposed tariffs and quotas mainly when lumber prices fell to a low level. That arrangement held while Biden was vice president. After it expired, Trump moved quickly to ramp up pressure on the Canadians. But even he scaled back his lumber tariffs in 2020.
The lumber tariff mess is yet another reminder that the Biden team urgently needs to review tariffs across the board. The administration recently rolled back steel and aluminum tariffs on the European Union. It’s a good start. As Biden looks for more ways to reduce living costs for everyday Americans, lumber tariffs are an obvious place to take action before prices - literally - go through the roof.