Trump administration looks to impose 20% tariff on Canadian softwood
In an opening salvo against American trading partners who dump their products in the U.S. at unfairly subsidized prices, the Trump administration is considering slapping a 20% tariff on Canadian softwood.
Softwood like pine is a critical wood used in the construction of single-family homes. The administration alleges that Canadian provinces are cheating by allowing loggers to cut down trees at reduced rates and sell them at low prices.
A spokesman for Canadian Foreign Minister Chrystia Freeland, who is in charge of U.S.-Canada relations, wasn't immediately available for comment. Canadian Prime Minister Justin Trudeau said last week that, when it comes to trade irritants, from lumber to dairy, he would present the facts to Washington and aim to work constructively on making improvements to the North American Free Trade Agreement.
Cameron Krauss, senior vice president of legal affairs at the U.S. Lumber Coalition said, "We appreciate today's actions by the Department of Commerce." The group represents large and small American lumber producers.
The trade row between the U.S. and Canada over lumber dates back decades, although the countries struck a deal in 2006 that stopped the U.S. from imposing additional duties. Under that arrangement, which expired in late 2015, Canadian forest producers agreed to accept either a quota on U.S.-bound exports or pay a tax on goods shipped to the U.S. in exchange for no tariffs.
The U.S. lumber industry filed a complaint last fall to the Commerce Department, alleging that Canadian lumber is unfairly dumped – or sold at less than market value – into the U.S. market. The complaint also alleges that Canada heavily subsidizes its timber industry by offering Pacific Coast producers access to wood from government-owned land at below-market prices.
The prospect of U.S. duties on Canadian lumber imports has roiled prices so far this year. Lumber futures rose more than 25% in the early months of 2017, peaking at their highest point in over 12 years.
President Donald Trump's heightened rhetoric over Canada's treatment of U.S. lumber and dairy producers in recent days marked a sharp pivot on America's northern neighbor and its second-largest two-way trading partner, after China, with nearly $545 billion in goods and services crossing the border in 2016.
During the election campaign and in the weeks following, Mr. Trump focused much of his trade ire against Mexico, China and Germany. When Mr. Trudeau visited the White House in February, Mr. Trump spoke of the U.S.'s "outstanding" trade relationship with Canada and how only some tweaking would be required to Nafta when it came to Canada.
While Trump's major trade beef is with China and Mexico, our allies in Canada and Europe may be the most blatant dumpers of all our trading partners. The U.S. has long complained about E.U. agricultural products having an unfair advantage over U.S. producers, costing American farmers billions in exports. This latest broadside against Canada highlights the broad disagreement between the two countries about subsidies.
All nations subsidize their exports to one extent or another. It becomes unfair when the subsidies look to deliberately undercut producers in the U.S. On the campaign trail, President Trump's strong rhetoric gave hope to American producers in several industries that his administration would crack down on the worst offenders. The consideration of a hefty tariff on Canadian softwood is a good start.
Sometimes, just the threat of an increased tariff can moderate the behavior of another country. Given the huge amount of trade we have with Canada, let's hope that's the case here.