The imposition of import tariffs on Canadian softwood lumber will place a heavy burden on consumers and U.S. workers, a leading American voice for free trade with Canada says.
The U.S. National Association of Home Builders says duties or volume caps on imported lumber will raise the price of lumber, adding more than $1,300 to the cost of a new single family home.
It also forecasts higher lumber prices will result in a net loss of almost 8,000 jobs if 25 per cent of duties are imposed on Canadian lumber flowing into the U.S. About US$450 million in wages would be lost along with US$320 million in government taxes.
The impact would mainly be felt by the construction industry, but also hit other sectors including mattress firms that use Canadian lumber in bed frames, transportation, finance, insurance and real estate.
Increased lumber prices along with higher interest rates would make new homes less affordable for average consumers. The association, which this year formed the American Alliance of Lumber Consumers, claims that about 153,000 households would no longer qualify for average mortgages with every US$1,000 increase the home prices.
That would hamper the U.S. housing recovery which is slowing improving since the 2008 financial crisis, says Paul Emrath, vice-president survey and housing policy research at the home builder association.
“It’s one of the roadblocks and obstacles we’re trying to overcome to get back to what should be a long and sustainable rate of production,” he said in an interview.
Last week, the U.S. Lumber Coalition petitioned the U.S. Department of Commerce and the U.S. International Trade Commission to impose duties to offset the harm to U.S. mills, workers and communities by what it claims is subsidized Canadian softwood lumber.
The coalition accused the builders of conducting a “highly flawed analysis” to reach its forecast, adding that forestry sector jobs are at risk.
“Insisting on fairness in trade would create more jobs in this sector that would support and strengthen thousands of American communities across the country,” it wrote in an email.
Canadian producers dispute the coalition’s claims of unfair trade, saying similar assertions were rejected by independent NAFTA panels in the prior round of trade litigation.
Industry analysts expect that following an investigation, the U.S. government will impose preliminary duties next April of between 25 and 40 per cent.
While the home builders oppose the lumber coalition, they are not big fans of the Canadian government’s negotiating tactics or the 2006 softwood agreement that has expired. It favours free trade, not the managed system in the prior deal that imposed export taxes if the price of lumber went below a certain amount.
“We feel strongly that Canada should have had a more aggressive stance early on in the negotiations rather than putting forth a proposal to go forward with the status quo,” said Suzanne Beall, the building association’s legislative director.
Beall acknowledged that some opponents of the coalition’s position may be reluctant to voice their position publicly for fear of being labelled anti-American.
A group representing independent U.S. lumber distributors says terms similar to the 2006 agreement would be acceptable as long as it doesn’t include a quota that would limit access to Canadian wood.
“Ultimately you want to be able to sell to your customers what they want and if what they want is Canadian spruce for example, you want to make sure that it’s available,” said Ben Gann, vice-president of legislative and political affairs for the National Lumber & Building Material Dealers Association.
The group worries that U.S. producers would be unable to make up the shortfall, which the home builders estimate would be two billion board feet per year.
Even though Donald Trump campaigned on getting tough on trade, supporters of a new softwood lumber deal hope that the new president will not want to risk his goal of accelerating U.S. economic growth by hampering the housing sector and raising costs for his massive infrastructure spending plans.