Our editorial: Lumber tariff a bad deal
If an answer was needed to the question of who gets hurt when the United States engages in trade protectionism, President Donald Trump provided it with his move to slap a 20 percent tariff on Canadian soft lumber. It’s the American consumer.
Trump waded into the longstanding beef harbored by timber companies in the American northwest, who accuse Canada of dumping lumber into the U.S. at below market prices.
Unlike in America, where commercial forests are largely privately owned, most timber in Canada is harvested from federal land. U.S. companies have for more than three decades accused the Canadians of unfairly subsidizing lumber production, giving their companies an advantage over domestic processors.
Soft lumber is heavily used in home construction, and about 65 percent of the boards that go into U.S. homes come from Canada.
And that’s where consumers will get hit. The targeted Canadian imports total $5 billion; the tariff will add $1 billion to the price tag.
That’s expected to drive up new home costs in the United States by 3 percent at a time when they are already climbing because of a shortage of construction workers.
The U.S. claim of lumber dumping has been examined repeatedly by the dispute resolution panel of the North American Free Trade Agreement and the World Trade Organization and found to be lacking in substance.
The Trump administration is also objecting to barriers Canada has thrown up to keep powdered milk from the U.S. off its markets. That’s a legitimate complaint, but not nearly as consequential financially as the soft lumber dispute.
The concern here, beyond the cost to consumers, is what the tariffs may signal about how the administration will approach renegotiation of NAFTA.
Canada is the United States’ second largest trading partner behind China. For Michigan, Canada is its No. 1 partner; bi-lateral trade totals $72 billion. An estimated 260,000 jobs in the state depend on Canadian trade and investment.
Canadian companies are critical suppliers to the automotive industry, which imports $31 billion in finished vehicles and parts from Canada.
Michigan refineries are also reliant on Canadian oil, importing $2 billion in crude petroleum.
It’s hardly a one-sided relationship. The auto industry exports more than $12 billion in automotive parts, heavy trucks and automobiles to Canadian customers. And the U.S. sells Canada nearly $1 billion in natural gas.
Trump, with the lumber tariff, may be warning Canada to expect tough terms when NAFTA is reopened.
But this is a curious game to play with America’s closest neighbor and its friendliest trading partner. Striking such a hostile tone ahead of what should be mutually beneficial trade talks risks pushing the Canadians into a more hard-line position.
If the lumber tariffs are the opening shot in what becomes a broader trade war with Canada, American consumers can expect to pay higher prices for a wide range of essential goods.
The inflationary impact will be hardly worth the boost the protectionist measures may give to northwest lumber producers.