Framing the Issues

Trump’s timber tariffs divide the construction industry

Development Feature International
Trump’s trade war on imported Canadian timber has presented both problems and potential for the U.S. lumber market and could affect the country’s housing stock as well. (Courtesy Pleasant River Lumber)
Trump’s trade war on imported Canadian timber has presented both problems and potential for the U.S. lumber market and could affect the country’s housing stock as well. (Courtesy Pleasant River Lumber)

Last November, the U.S. Department of Commerce under President Trump announced an average of 21 percent import duties on Canadian timber products entering the U.S. The announcement was greeted with mixed reactions within the construction industry; builders claimed that the tariffs would increase the cost of construction, and American suppliers argued that the domestic timber industry would benefit, expand, and keep wood prices low.

Single-family home construction in the U.S. relies heavily on Canadian softwood for roofing and framing. In 2017, Canadian lumber yards supplied 28 percent of the U.S. softwood lumber market, and home builders have been the first to raise concerns about the new duties, which were in effect by January.

The National Association of Home Builders (NAHB) claims that the imposed tariffs have added approximately $9,000 to the cost of single-family homes and up to $3,000 on multi-family homes. The NAHB doesn’t believe U.S. domestic production is capable of meeting the current market demand and that the tariffs only hurt native manufactures by forcing them to increase their lumber prices. The NAHB is calling for the Trump administration to resume talks with Canada to secure a more mutually beneficial long-term agreement.

David Logan, director of tax and trade policy analysis at the NAHB, says that historically, the U.S. lumber field has never been able to support rapid housing growth. “Buyers are still buying from the distributors they’ve always sourced from despite the tariffs,” he said. “Domestic lumber production has increased marginally in the last year, but it’s not kept up with the housing demand in terms of percentages, so it’s hard to say that we’re meeting the challenge. This has always been the case. We can’t meet that need…not even close.”

Logan also argued that larger lumber companies in the U.S. are profiting unfairly from the deal, citing the Seattle-based Weyerhaeuser, which owns 12.4 million acres of forest in the U.S. alone and manages 14 million acres in Canada, as well as West Fraser, a Vancouver-based company that operates 48 mills across both countries. The NAHB claims that these companies are able to reap the benefits of both markets under the current trade agreement and likely won’t be affected if things change again.

“We say over and over again that we need predictable and stable supply. That means using Canadian lumber,” Logan said. “Diversification of operations in the biggest mills on both sides of the border has really hampered any progress towards talking further about this issue because they’re able to increase production and do well. Prices have been so high there’s not really room for anyone but the big players to have a seat at the table, whether they’re Canadian or American.”

The U.S. Lumber Coalition (USLC) rejects these claims. “Since the duties were implemented,” the USLC wrote in a statement last week, “U.S. lumber shipments have increased by about 1.4 billion board feet, roughly filling the gap left by the decrease of Canadian imports. U.S. companies continue to invest in expanding their production capabilities to mill lumber from American trees by American workers to build American homes.”

The National Association of Home Builders and the U.S. Lumber Coalition are at odds, claiming that the current timber tariffs hurt the U.S. economy and benefit it respectively. (Courtesy Pleasant River Lumber)

Pleasant River Lumber, a small milling company based in Maine, isn’t experiencing the negative side effects that the NAHB claims is coming out of the current tariffs on timber. In fact, the company is on track to complete a $20 million expansion at two of its four sawmills in the next 18 months. As part of the USLC, Pleasant River Lumber sources 95 percent of its lumber within the state of Maine and takes a bit from New Hampshire and Canada as well. Owner Jason Brochu is pleased with the country’s newfound focus on local production and plans to take advantage of it.

“Increased demand due to forest fires and hurricanes in other states, spiked prices from the duties, heightened transportation costs, and a strong housing market all factor in to establish a level playing field for lumber production in the U.S. right now,” said Brochu. “We can’t compete against the government or any larger mills without things being equal.”

Pleasant River Lumber is capitalizing on the growing lumber market by adding 50 percent more capacity to its production facilities and hiring 40 new employees as quickly as possible. They plan to boost production of their dimensional lumber from 200 million to 300 million board feet annually with the upgraded equipment. More importantly, they’re investing in their framing mills to address the increased demand within the housing market.

“We believe we’re pretty typical of most mills in the country at this time,” Brochu said. “Most mills in Maine specifically are adding shifts or putting more money into mills to increase volume. We’re confident that the duties protect our rights as producers in the U.S. and we feel like the laws are working the way they should.”

Brochu also emphasized how “relatively insignificant” framing lumber is in housing construction. USLC said the same thing stating that lumber makes up only 2 percent of the cost of a new home—which in 2018 stands at $368,500. 

Pleasant River Lumber operates four mills throughout the state of Maine and has introduced a $20 million expansion plan to upgrade two of its framing lumber facilities thanks to the booming domestic market. (Courtesy Pleasant River Lumber)

Framing lumber isn’t the only wood material that’s used to construct new homes. Plywood, which has zero duties imposed on it, flooring, and other timber products are also increasing in price. New York-based specialty wood-product manufacturer Hudson Company said the niche wood market has been affected as well. Two of its most popular reclaimed-wood products, both of which feature Canadian imported lumber, have both been impacted dramatically, says owner Jamie Hammel. Sales of silver pine siding are down by 60 percent, while hand-hewn beams are down 40 percent.

“The reason our business is not down by 60 percent,” he said, “is because we sell other things. But we’ve had to limit the amount of volume we import because of the tariffs and we’ve had to diversify our product line to adjust and will continue to do. We’ve had to source more products locally which I guess was the administration’s goal.”

The timber tariffs against Canada were among the first official duties placed on another country by the U.S. government since Trump took office. In the ten years since the Softwood Lumber Agreement (SLA) was established in 2006, the U.S. Commerce Department has allowed Canadian companies to sell lumber to the U.S. market at subsidized prices, lifting previously countervailing and anti-dumping duties as long as prices stayed above a certain figure. The SLA expired in 2015 and since then both countries have been unable to negotiate a new deal.  

On behalf of the NAHB, Logan said that his organization doesn’t foresee a new Canada-U.S. deal happening in the near future.

“We don’t think the dialogue will reopen any time soon as long as the North American Free Trade Agreement negotiations are ongoing. If history repeats itself…the last time this happened it took around 5 years to settle,” he said referring to the original SLA. “Hopefully I’m wrong and this is done very quickly. Until then, prices will maybe get a bit higher, but volatility will certainly increase.”

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