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Will the Canadian Lumber Tariff Impact Homebuilders?

Posted On April 27, 2017

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This week, US Commerce Secretary Wilbur Ross announced that his agency will impose new anti-subsidy tariffs on Canadian softwood lumber imports.  The tariffs are said to average 20%, and the move will impact the $5.66 billion worth of imported construction material.  American homebuilders will be most impacted by the new tariff.

Softwood lumber is a product from cone-producing trees including spruce, pine, and fir.  It is Canada’s biggest export to the United States.  Bloomberg Intelligence reports 78% of Canada’s total softwood export went to the United States in 2016. 

According to a Bloomberg Q&A interview, “The U.S. lumber industry alleges Canadian wood is heavily subsidized and that imports are harming American mills and workers. Canadians argue the U.S. depends on its lumber for home construction and won’t be able to meet demand without its neighbor to the north. It’s a rift that goes back decades.”

Secretary Ross asserts that the increase in lumber prices will not significantly impact home prices, stating that lumber is just a small percent of the price of a house and it’s silly to think that house prices will jump 10% - 15% as a result. 

The National Association of Home Builders (NAHB), the trade group representing more than 140,000 builders, released a statement that denounces Secretary Ross’s decision.  In the statement, the NAHB contends that the tariff will harm American homebuyers, consumers, and businesses.  NAHB estimates that the tariff will result in the loss of nearly $500 million in wages and salaries of US workers, $350 million in taxes and other revenue for the government, and more than 8,200 full-time jobs.

 

Sources: HousingWire, Reuters, Bloomberg