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Lumber Trade Idiocy: Trump Hits Canada with Proposed 20% Tariff on Lumber

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After bitching about the unfair trade policies of China, Mexico, Germany, and Japan for years, Trump finally decided to act.

His first target is Canada.

The dispute centers on Canadian provinces that have been allegedly allowing loggers to cut down trees at reduced rates and sell them at low prices

The Wall Street Journal reports Trump Administration Plans to Impose 20% Tariff on Canadian Softwood-Lumber Imports

The Trump administration is taking retaliatory action against Canada over a decades-old trade dispute, moving to impose a 20% tariff on softwood lumber that is typically used to build single-family homes, Commerce Secretary Wilbur Ross said Monday in an interview.

Mr. Ross said the tariff would be applied retroactively and imposed on Canadian exports to the U.S. of about $5 billion a year. He said the dispute centers on Canadian provinces that have been allegedly allowing loggers to cut trees down at improperly subsidized costs and sell them at lower prices.

The decision is preliminary and the Commerce Department will need to make a final determination. After that, the U.S. International Trade Commission will also need to find that the U.S. industry has suffered injury before any tariff is levied. But even a preliminary decision has immediate real-world consequences, by discouraging importers from buying lumber from Canada.

The Canadian government said late Monday it "disagrees strongly" with the Commerce Department's decision, arguing the reasoning was based on "baseless and unfounded" allegations from the U.S. lumber industry.

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 and 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. The U.S. ran a trade deficit of $5.28 billion in 2016 with Canada on products from sawmills, which captures softwood lumber-or the product at the heart of the U.S.-Canadian dispute.

Lumber Futures

Trade Idiocy

Daniel J Hannan, a member of the UK parliament gets it. Most don't.

To protect a few thousand lumber industry jobs, the entire homebuilding industry will pay more for lumber. There will be a net loss in jobs as a result of this nonsense.

Ironically, not even lumber industry jobs will be saved if the action causes a housing slowdown.

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Mike "Mish" Shedlock


This article was written by Mike Shedlock for MishTalk on Apr 25, 2017.

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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