Price of lumber brings new urgency to old trade fight
WASHINGTON — A trade dispute over Canadian lumber that began when Ronald Reagan was president has become a political problem for President Joe Biden, with homebuilders and members of Congress urging the administration to try to strike a deal that could help bring down the cost of critical building materials.
Lumber prices remain far above prepandemic levels, even after falling sharply in recent weeks, an increase driven in part by strong housing demand and an abundance of home improvement projects during the pandemic. The higher-than-normal prices are among a wide range of supply chain complications that have cropped up as the economy picks up steam.
But unlike other commodities that have been in short supply, lumber is also the subject of a long-running trade dispute between the United States and Canada, adding a layer of diplomatic intrigue to the scramble for in-demand building materials. The two countries are locked in a thorny disagreement over softwood lumber, which is widely used to build single-family homes.
In the latest chapter of the dispute, the Trump administration in 2017 imposed duties on Canadian softwood lumber imports in response to what it deemed unfair trade practices. Now, with lumber prices driving up the cost of new home construction, the Biden administration is facing pressure to seek a resolution.
“If you look at the structure of homebuilding — a lot of wood there,” said Rep. Brian Higgins, D-N.Y., whose Buffalo-area district borders Canada. “So the cost of softwood lumber is going to profoundly influence the cost that is inevitably passed on to the consumer.”
The National Association of Home Builders, an influential trade group, has been particularly vocal about the issue, and numerous lawmakers have taken an interest as well. Last month, a bipartisan group of nearly 100 House members, led by Higgins and Rep. Kevin Hern, R-Okla., wrote to Katherine Tai, the United States trade representative, urging her to seek a deal with Canada.
But signs of progress have been scarce, and Canadian lumber producers may soon face higher duties. The Commerce Department said last month that it tentatively planned to double the duties later this year, to 18.3% from 9% for most producers.
The move was cheered by the American lumber industry, but it drew criticism from U.S. homebuilders along with the Canadian government and the country’s lumber industry. Chuck Fowke, a custom homebuilder in Florida and the chairman of the National Association of Home Builders, said the planned increase “shows the White House does not care about the plight of American homebuyers and renters.”
Commerce Secretary Gina Raimondo, who met with the homebuilders group last month, said afterward that she would seek to “identify targeted actions the government or industry can take to address supply chain constraints.”
Finding a resolution to the trade dispute is unlikely to be a simple undertaking for the Biden administration. “There’s really nothing that the administration can do quickly,” said Scott Lincicome, a senior fellow at the libertarian Cato Institute, who criticized the lumber duties and the system that allows domestic industries to seek them.
In 2016, the American lumber industry petitioned the government to impose duties on Canadian softwood lumber imports in response to what it contended were unfair trade practices. The proceedings continued under the Trump administration, which in 2017 imposed duties of 20.2% for most Canadian producers. The rate was lowered to 9% last year.
The status of the dispute took on a new urgency as the price of lumber soared over the past year. The National Association of Home Builders estimated in April that higher lumber costs had added nearly $36,000 to the price of an average newly constructed single-family home. A bench mark for the price of framing lumber set a record high of $1,515 per thousand board feet in May, four times the price at the beginning of 2020, before beginning to plummet. Last week, the price stood at $930, still more than double its level at the start of 2020, according to Fastmarkets Random Lengths, the trade publication that publishes the bench mark.