San Antonio Express-News (Sunday)
Lumber tariffs help drive up home prices
Want to better understand what States Donald may economy Trump happen pursues as in President the his United combative trade policies?
Look no further than the lumber that goes into many houses in the United States.
Long before the sharp clash with Canada at the Group of 7 meeting this past weekend, the Trump administration imposed tariffs on lumber imports from Canada, which U.S. homebuilders use in large quantities. The U.S. Commerce Department contended that Canadian companies were selling lumber into the United States at unfair, subsidized prices.
Those tariffs, which took effect last year, combined with other factors to drive up the price of lumber in the United States. As a result, the antidumping and countervailing duties, as the tariffs are officially known, have added to the cost of housing in the United States at a time when homes are becoming less affordable. The Trump administration’s and that to and Wilbur rising aluminum, consumers. follow, costs Ross, could for and the tariffs also businesses Commerce any contribute on others steel Secretary, tariffs. tervailing “Anti-dumping duty defended determinations the and lumber counprovide with relief the from domestic dumping industry and improper subsidies,” he said in a statement to The New York Times last week. “Price fluctuations from other factors are not part of the calculus.” Tariffs might be expected to push up the price of a good to a certain level, but in this case, the price of Canadian lumber kept rising. The cost of 1,000 board feet of western Canadian lumber is up nearly 80 percent over the past 12 months, including about 40 percent this year, according to data from Random Lengths, a publication that covers the lumber market. What caused this unusual rise? Paul F. Jannke, a principal at Forest Economic Advisors, a firm that analyzes the lumber market, said that the tariffs had contributed he supply caused added, of by Canadian a recent reduction to the rail ascent. lumber, slowdowns in the But, and role. tree Ross, disease, in his statement, played a big noted these causes. “The prices have gone up by much more than the tariffs because of supply and demand factors,” he said. “The purpose of the tariffs was to level the playing field for the Americans.” In the first quarter of 2018, the United States imported 3.07 billion board feet of Canadian lumber, down 15 percent from 3.63 billion board feet a year earlier, according to data from Forest Economic Advisors. Also, Canadian lumber imports in the first quarter were equivalent to 36 percent of U.S. domestic lumber production, down from 42 percent in all of 2017. Is this evidence that the tariffs have priced the Canadians out of the U.S. market, allowing American producers to fill the gap? Probably not. The declines in Canadian shipments are more the result of tree disease and the slower rail transportation than tariffs, Jannke said. Also, U.S.
lumber production does not appear to be growing at a faster rate. In the first quarter, it was up 3 percent over a year earlier. In 2017, it grew at a 4.4 percent annual rate. Large Canadian lumber producers have done well financially despite the trade friction. The stock of West Fraser Timber, a big Canadian producer, has gained 53 percent in the last 12 months, and its 2018 first-quarter earnings rose 60 percent from a year earlier. “The tariffs did not constrain Canadian production nor was that their purpose,” Ross said in his statement. “Their purpose was to protect the U.S. lumber industry from subsidized softwood lumber dumping. These tariffs will be most beneficial to the U.S. producers in the next down cycle. In an up cycle, everyone benefits.” But such words may not satisfy U.S. homebuilders, who are grappling with the much higher lumber prices while other costs — like wages — are also going up. For now, many homebuilders are passing on their higher costs to homebuyers. In recent months, executives from publicly traded homebuilders have told their shareholders that they expect to maintain their profit margins even as their costs rise.