US homebuyers foot the bill for Canadian lumber tariff

In a blow to millions of prospective American homebuyers, the U.S. Department of Commerce has imposed countervailing duties averaging 20 percent on imports of Canadian lumber to the U.S.

Why should such a development be of concern to Americans? Because U.S. trade policy can have a direct impact on housing affordability.

Commerce Secretary Wilbur Ross is mistaken when he says the tariffs will have little effect on the cost of housing. If these duties remain in effect throughout the year, the National Association of Home Builders estimates they will result in the loss of:

• $598.3 million in wages and salaries for U.S. workers
• $350.2 million in taxes and other revenue for governments in the U.S.
• 8,241 full-time jobs

{mosads}Moreover, lumber prices have already jumped 22 percent since the beginning of the year, largely in anticipation of new tariffs. This price spike has added nearly $3,600 to the cost of a new single-family home. When you consider that each $1,000 increase in the median price of a new home makes homeownership unaffordable to 150,000 households, you can quickly see how this tariff can have a ripple affect across the nation.

It’s not just homebuyers and consumers who are hurt by tariffs. According to the Bureau of Labor Statistics, in 2016, housing and related industries that used softwood lumber employed nearly 4.5 million American workers and outnumbered U.S. lumber-producing workers 31 to 1.

This new tariff will do little to increase U.S. lumber industry employment or the share of U.S. lumber supply coming from domestic production, but it will mean bigger profits for U.S. lumber mills and private landowners. Essentially, the import restrictions represent a subsidy to U.S. timber companies paid for by American homebuyers.

Dating back to the 1980s, there have been three previous countervailing duty cases on this issue, and in each case in which it was taken to a final decision, it was ultimately determined that the Canadian government did not provide unfair subsidies to its lumber industry.

Yet, after the latest Softwood Lumber Agreement between the U.S. and Canada effectively expired last October, the U.S. Lumber Coalition, an alliance of domestic softwood lumber producers, urged the Commerce Department to move forward with this new border tax.

Since the timber industry is a much larger component of the Canadian economy compared to the U.S., domestic producers know that the Canadian government will be under a great deal of pressure to accept a new deal that will be unfavorable to Canadian lumber firms and U.S. lumber consumers.

Protectionist policies to prop up domestic lumber producers at the expense of millions of U.S. homebuyers and lumber users is not the way to resolve the U.S.-Canada trade dispute or boost the U.S. economy.

To truly put the interests of America first as it relates to this trade issue, NAHB believes the U.S. and Canada need to work cooperatively to achieve a long-term, stable solution in lumber trade that provides a steady supply of lumber at a reasonable price. This is essential because lumber tariffs not only act as a tax on American homebuyers, they also needlessly increase volatility in the lumber markets, resulting in higher prices for U.S. lumber consumers.

A viable trade pact is also vital because the U.S. does not produce enough lumber to meet the nation’s needs. Last year, 33 percent of the lumber used in the U.S. was imported, and more than 95 percent of those imports came from Canada.

NAHB also remains fully committed to boosting domestic production by seeking higher targets for timber sales from publicly-owned lands and opening up additional federal forest lands for logging in an environmentally-sustainable manner.

Further, American producers, who cannot produce enough lumber to meet domestic consumption, continue to export lumber to countries like China because it is more profitable to sell abroad then at home in some circumstances. We need to “sell American” to Americans and reduce lumber exports.

Since our nation is reliant on Canadian lumber imports, it is also prudent that the industry and government alike explore new markets to make up for our domestic shortfall. Given that the U.S. and Chile have a free-trade agreement that covers lumber, NAHB has worked with the Chilean government and industry to help their lumber products meet American standards and to perfect their supply chain. Other potential markets include Sweden and Brazil.

The U.S. government has often scolded other nations for imposing import trade barriers that hurt their citizens in order to protect special interests. That is why it is so disappointing that the Trump administration, at the behest of the domestic lumber lobby, has apparently elected to pursue the same type of protectionist strategy at the expense of American consumers.

We can’t let special interests hijack the national interest. 

Granger MacDonald is the chairman of the National Association of Home Builders.

The views expressed by contributors are their own and not the views of The Hill.