Posts tagged with "Tariffs":

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Potential tile tariffs drive a wedge between distributors and designers

Seizing on the momentum generated by the Trump administration’s timber and steel tariffs, a coalition of tile manufacturers is lobbying the U.S. government to impose tariffs of over 400 percent on Chinese-supplied ceramic tiles. While the approval of new duties could lift domestic producers, some design industry professionals are pushing back. On April 10, eight U.S. ceramic tile producers, all members of the Tile Council of North America, successfully petitioned the Department of Commerce (DOC) to launch an investigation into China’s practice of tile dumping. That group, collected under the name "Coalition for Fair Trade in Ceramic Tile," included American Wonder Porcelain, Florida Tile, Inc., Crossville, Inc., Florim USA, Dal-Tile Corporation, Landmark Ceramics, Del Conca USA, Inc., and StonePeak Ceramics. The coalition claims that the Chinese government is subsidizing the production of ceramic tiles to below-market-rate prices (or even below production costs) to artificially crowd out the competition, and the group is asking that the DOC impose retaliatory penalties on Chinese manufacturers to level the playing field. To avoid confusion over what is and is not a tile, the coalition has issued a blanket request pertaining to any tile-like product, no matter the use, thickness, or design, for pieces up to five-feet-by-fifteen-feet. The scope of the complaint also includes tile originating in China and modified— beveled, painted, or refined in any way—in the United States. In response, the newly-formed Ceramic Tile Alliance (CTA), a group of designers, retailers, and distributors, has launched a petition against imposing new tariffs on Chinese tile. The group argues that doing so would hurt the long-term health of the U.S. ceramics industry to the benefit of domestic manufacturers, that architects and interior designers would lose valuable connections that they’ve cultivated with international artisans, and that retailers would only be able to offer a limited selection. Additionally, the CTA alleges that showrooms would need to renovate their displays, some of them larger wall and floor pieces, to reflect that certain products would be no longer available. Overall, the CTA estimates that “thousands” of jobs could be lost as distributors and retailers would be forced out of business by higher prices and restricted supplies. The United States International Trade Commission (ITC) will issue a preliminary injury determination by May 27. If the ITC and DOC find in favor of the coalition, the duties could be imposed as early as the beginning of next May.
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The U.S. mass timber industry is maturing while it branches out

This article originally appeared as part of our January 2019 print issue in the timber feature.

President Donald Trump’s tariffs, enacted in November 2017, have not yet made a significant impact on the U.S. mass timber industry. But if Trump chooses to take more aggressive action in the next two years of his administration, this could dramatically change. This urgency, coupled with the recent global obsession with building tall wood structures, newly motivates American wood manufacturers to become independent of foreign suppliers. This would entail American manufacturers catching up in machine technology and production capacity to bolster domestic trade and support innovative architecture sourced from home.

What’s clear is that U.S. demand for wood buildings is there. The country’s largest producer of cross-laminated timber (CLT), SmartLam, has experienced such rapid growth since opening six years ago that it is building a new headquarters in Columbia Falls, Montana, and planning a second facility in Maine to supply what the industry thinks will be an influx of midrise construction in New York and other cities along the Eastern seaboard.

“The expansion here is simply driven by need,” said SmartLam CEO Casey Malmquist. “There’s always been a grassroots support for CLT in the U.S. and a recently increased interest in research and testing. But now we’re no longer speculating about whether it will work—it’s going mainstream.”

While similar Pacific Northwest companies like DR Johnson and Katerra, as well as firms such as LEVER Architecture and Michael Green Architecture, have long led the field, production is growing in uncharted territories. South Carolina–based LignaTerra is adding another plant in Maine, while Canadian leaders like Nordic Structures in Montreal and Structure Fusion in Québec City, which already supplied CLT to projects across the country, are now focusing more attention on supplying the eastern U.S. market. Production is even swelling in the South with Texas CLT LLC, which is reopening a mill in southwest Arkansas.

But pioneering European companies, which have historically dominated the market and supplied American developers, are now putting down roots in the U.S. Austrian giant KLH is partnering with International Beams’ new factory in Dothan, Alabama, by supplying it with glulam blanks. Having opened this past September, it is the first plant east of the Rocky Mountains to produce CLT in the country and will primarily utilize the unique Southern Yellow Pine native to the region.

These investments show that the race to build such production facilities is vital to the U.S. market becoming competitive with other countries. But many experts say we need to increase cultural acceptance of mass timber as well as get investors on board before the industry starts churning up a sizable profit.

“The real strategy is that the big manufacturers in Europe are focused on making franchises here,” said Alan Organschi, principal of Gray Organschi Architecture in New Haven, Connecticut. “They can produce higher quality products cheaper, even with overseas shipping, than manufacturers can in the U.S. and Canada.”

Organschi’s firm has been at the forefront of timber innovation for 20 years. He is confident the market is growing and will prove that by designing 6- to 14-story buildings, the sweet spot for mass timber construction. Dominique Briand, general manager of Canadian structural engineering firm Structure Fusion, is also optimistic about North America’s future, but feels certain that product-specific issues still need to be addressed before wood can match the quality of other structural materials like steel and concrete.

“The problem is the tools are not there,” Briand said. “There’s not enough manpower or knowledge to make or sell mass timber in the United States. Plus it’s a disorganized market, which creates a big gap between the product and the project.”

Briand believes that as long as timber is trendy, it will take young U.S.-based companies about five to ten more years to be competitive with Europe. In the meantime, architects, engineers, and educators are working to imagine groundbreaking designs at modest scales to ramp up domestic interest and encourage policy changes.

Many U.S. states are using financial incentives to entice manufacturers to locate to their respective regions. In Maine, both the state and federal governments have provided funding for the University of Maine’s extensive research to advance timber assemblies. Russell Edgar of the university’s Advanced Structures & Composites Center says the ultimate goal of this work is to organize the state’s supply chain in order to make Maine viable for these companies.

“People are talking a lot about South Carolina and Georgia since they grow trees like corn at such rapid rates,” he said. “But in Maine, we have proximity to these huge markets in New York and Boston, so we’re busy trying to find ways to get these companies here now.”

Sourcing timber products within 250 miles of a project is a huge advantage to practicing sustainability and boosting regional economies—not to mention a reason for rarely crossing borders for building materials. But a little competition is healthy, especially for lumber producers who want to bid in a fair marketplace.

“The more people there are, the better it will be,” said Briand. “I only worry that because we’re such a fast-evolving industry, a lot of companies will build huge facilities and focus solely on making and selling products. It’s not just about the products; it’s about creating strong business plans so the investment pays off.”

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Manufacturers launch ad campaigns to get their message to Trump

A group of American manufacturers has developed a new strategy to get their message to President Trump. Knowing that the president regularly watches a handful of programs on Fox, a trade organization has bought airtime for 30-second ads during the president's favorite shows to promote the group's messages. Bloomberg reported on a campaign from the Association of Equipment Manufacturers (AEM) that debuted this month and encourages Trump to follow through on his campaign promise to create a massive national infrastructure spending program. The ad plays a clip of Trump's campaign victory speech when he said, "We’re going to rebuild our infrastructure." Another AEM ad from earlier this year encouraged the president and congressional leaders to reject steel tariffs, saying that they would harm equipment manufacturers. The clips show blue-collar workers speaking directly to the camera, often explicitly addressing the president. The steel tariff ad begins with a worker saying, "Mr. President, thanks to you, equipment manufacturing right here in Illinois is growing stronger." After a bit more ego-boosting, the workers then say that tariffs would undo the support that the president has shown industrial workers. Trump is known to be an avid television-watcher and reportedly insists on watching several Fox programs every day. The spots will run during programs like Fox and Friends, The Sean Hannity Show, and Tucker Carlson Tonight. According to Bloomberg, AEM plans to spend $250,000 on the infrastructure campaign.
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Trump's timber tariffs divide the construction industry

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.” 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.  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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Trump's steel tariffs are already squeezing the construction industry

Less than two weeks after President Trump signed sweeping 25 percent steel tariffs and 10 percent aluminum tariffs into law, the construction industry is already smarting, according to a report by National Real Estate Investor. Although the tariffs exclude steel coming from Canada and Mexico (at the time of writing), interviews with developers and those in the construction industry suggest that some projects are already seeing steel increase in cost by up to 10 percent. The culprit is speculation about price increases six to twelve months down the line, after the full impact of the tariffs make themselves felt. The panic isn’t without precedent. A 21 percent tariff imposed on imported Canadian timber in November of last year, used in 25 percent of wood-framed projects in the U.S., led to a nationwide rise in construction costs for single and mid-family homes. Contractors were forced to raise their prices, cut back on their use of timber, switch to steel, or change the design of their homes to use less materials. Joe Pecoraro, a project executive at Chicago-based general contractor Skender, told National Real Estate Investor that a client developing affordable housing might be forced to delay their project if steel costs rose any further. “Uncertainty drives people to be very conservative, risk-averse. It is affecting our deals,” said Pecoraro. Ironically, domestic steel fabricators may be hit harder than international firms as a result of the tariffs only targeting raw steel. With costs rising for their raw materials, Engineering News Record has reported that some domestic fabricators have already lost jobs to competitors based in Canada and Mexico. 1.2 million tons of fabricated steel was produced in the U.S. with imported materials in 2017, which went towards building bridges, roads and buildings. Two days before President Trump signed the tariff order, the AIA had released a statement warning that rising material costs would lead to decreased project budgets and potentially stifle architectural innovation. It remains to be seen how the tariffs will affect the country’s building boom in the long term, but those in the steel industry are still onboard.
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AIA speaks out against Trump's proposed steel and aluminum tariffs

New tariffs on steel and aluminum proposed by President Donald Trump will have negative effects on the American design and construction industries, American Institute of Architects (AIA) leadership has said in a statement. The Trump administration's plan would impose tariffs of 25 percent on steel and 10 percent on aluminum, something that experts say will have wide ranging effects on both trade and the domestic economy. And while the issue is being hotly debated on the national and international stage, the AIA is weighing in with a striking warning that a rise in material costs could mean major losses for the U.S. economy. "The Administration’s announcement of new tariffs on steel and aluminum imports threatens to drastically increase the prices of many building materials specified by architects. These metal products are some of the largest material inputs in the construction of buildings. Structural metal beams, window frames, mechanical systems and exterior cladding are largely derived from these important metals," AIA President Carl Elefante, FAIA, and EVP/Chief Executive Officer Robert Ivy, FAIA, said in a statement in response to the proposed tariffs. “As creative problem solvers, architects rely on a variety of these materials to achieve functional and performance goals for their clients. Inflating the cost of materials will limit the range of options they can use while adhering to budgetary constraints for a building," they said. "By the same token, the Administration’s proposed infrastructure funding will not achieve the same value if critical materials become more expensive. Furthermore, the potential for a trade war risks other building materials and products. Any move that increases building costs will jeopardize domestic design and the construction industry, which is responsible for billions in U.S. Gross Domestic Product, economic growth, and job creation.”
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U.S. to tax Canadian lumber—what could this mean for the construction industry?

The Unites States has picked a fight with one of its most peaceful trading partners, this time over a popular construction material. Yesterday the U.S. announced it will impose duties on imported Canadian softwood lumber. Canada, predictably, is not happy with the move. The U.S. Commerce Department said it will put in place "preliminary anti-subsidy duties" of around 20 percent, a move that will impact $5.66 billion in imports, Reuters reported. The decision comes as the U.S., Canada, and Mexico gear up to renegotiate North American Free Trade Agreement (NAFTA) later this summer. The U.S. said that Canada's West Fraser Mills would pay 24.12 percent, the highest duty rate, while J.D. Irving Ltd would pay the lowest (3.02 percent). Aside from a few other major producers, all Canadian timber companies will pay a 19.88 percent duty. This is only the latest point of contention in a decades-long dispute between the two countries over lumber. The U.S. government claims that Canadian timber producers, who harvest the wood on government land, have an unfair trade advantage over American timber producers, who typically get their wood from privately-owned property. In a statement, Canadian Natural Resources Minister Jim Carr and Foreign Minister Chrystia Freeland characterized the Commerce Department's claims as "baseless and unfounded." Canada said it will make moves to protect its lumber in court. All told, the duties would add up to about $1 billion annually, but could cause construction costs in the U.S. to rise. Wood yew like to learn more? Construction Dive has insight into what the move will mean for the AEC industry. The New York Times reports that a study by the National Association of Home Builders estimates that a tariff of 15 percent could raise new home prices by around 4 percent, while Bloomberg News gives greater context to the history of the hard-headed history of the softwood lumber dispute.