It isn’t often that an international argument has a direct impact on a local industry, but such may be the case with President Donald Trump’s move to impose a tariff of between 3 and 24.1 percent on softwood lumber imported from Canada.
In effect a tax, tariffs are intended to provide a competitive advantage for U.S. goods or to counteract an unfair disadvantage such as might result from a foreign government subsidizing its own industries. Efforts to level the playing field in this way are common but hazardous, in the sense that they can incite foreign governments to retaliate against U.S. products.
Canada currently controls about one-third of the U.S. market share for softwood lumber, which is used for framing houses and some other purposes, such as building mattress box springs.
This particular fight has gone on since at least the early 1980s, and even farther back in other forms. U.S. Sen. Ron Wyden, the Oregon Democrat, recently called it the “longest-running battle since the Trojan War.”
As explained by the business journal BloombergPolitics, “Most of the softwood in Canada is owned by provincial governments, which set prices to cut trees on their land, while in the U.S. it’s generally harvested from private property. The fees charged by Canadian governments are below market rates, creating an unfair advantage, U.S. producers say. Canada disputes that.” The U.S. Department of Commerce alleges the Canadian government provides up to 32 additional types of subsidies to keep its lumber artificially cheap.
Logging and lumber production represent a significant economic sector in our region. Though nowhere near as dominant as they were a century ago, forestry-related firms remain key to rural economies such as ours, and most in the industry will be grateful for federal help in this fight, so long as it is effective and long-lasting.
Andrew Miller, CEO for Oregon-based Stimson Lumber Co., told National Public Radio that particularly when homebuilding is on a down cycle, the Canadian subsidies in effect act like a grocer holding his thumb on the scale as produce is being weighed. Over time, this inequity has discouraged investment and made it harder for U.S. companies to compete.
“People are less inclined to hire, and meanwhile the Canadian mills are humming away at full employment,” Miller said. He and others in the U.S. industry say that increasing their share of the domestic market will directly translate into more American jobs at mills.
The Trump tariffs were actually a good deal less than some expected — not wildly out of line with those the two governments have agreed to in the past. Miller said he estimates they would only add about $200 to the cost of a new $250,000 house, though U.S. homebuilders — who oppose the tariff — have a higher figure.
Long experience with tariffs suggests they are usually not the best way to achieve goals that instead require careful and rational negotiations. However, in this case the Trump administration may have chosen the right tool for the right job.