Softwood lumber, often used for structural framing and decking, among other uses, may be seeing a price increase in the US in the near future. On Monday, the U.S. Department of Commerce (DOC) has announced that they will be imposing tariffs of up to 24% on all softwood lumber imported from Canada.
"It has been a bad week for U.S.-Canada trade relations. Last Monday, it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States. Today, in a different matter, the Department of Commerce determined a need to impose countervailing duties of roughly one billion dollars on Canadian softwood lumber exports to us. This is not our idea of a properly functioning Free Trade Agreement,” said Secretary of Commerce Wilbur Ross in a statement.
According to the DOC, Canada imported around $5.66 billion worth of softwood lumber in 2016. The countervailing duties, which are imposed to counter apparent Canadian “subsidies,” are going to be established at different rates to different companies. The DOC released a fact sheet, which explains the subsidy rates:
“for Canfor Corporation, 20.26 percent; for J.D. Irving, Limited, 3.02 percent; for Resolute FP Canada, Ltd., 12.82 percent; for Tolko Marketing and Sales Ltd. and Tolko Industries Ltd., 19.50 percent; and, for West Fraser Mills, Ltd., 24.12 percent. Commerce established a preliminary subsidy rate of 19.88 percent for all other producers/exporters in Canada.”
While this tariff will surely be good news for US Lumber suppliers, Canada is unsurprisingly disgruntled by the decision. There’s been a longstanding dispute with regards to US and Canada lumber trade, because Canada’s lumber is largely owned by provincial governments, according to Bloomberg. This arrangement allows each province to establish their own prices, giving them the opportunity to subsidize the industry and effectively lowering the cost of the lumber that’s exported. US suppliers say the subsidies give Canadian lumber companies an unfair advantage. Canadian Foreign Minister Chrystia Freeland have vowed to defend the Canadian softwood industry and sue, if needed.
All tariff rates are currently preliminary and a final countervailing duty determination is currently expected to be announced on September 7, 2017.