Trade dispute between US, Canada could hit builders

April 26th, 2017 4:13am
Lumber is a key natural resource that is traded in huge quantities around the world.

Lumber is a key natural resource that is traded in huge quantities around the world. The U.S. and Canada are key trading partners for lumber used for a variety of applications, including homebuilding. However, relations between the two nations regarding the commodity have been fraught with tension for decades, according to reports from The New York Times. And now that a new presidential administration has taken control, new proposals for tariffs on Canadian lumber have raised the economic stakes even further.

U.S. Commerce Secretary Wilbur Ross announced April 24 that the administration was proposing a new tax on exports of softwood lumber, also known as a tariff. The tax would add an average of 20 percent to the cost of Canadian lumber sold to American businesses. With home developers being among the primary buyers of lumber products in the U.S., many in the industry are worried this could drive up costs and eat into profits.

Bloomberg explained that in the opinion of administration officials, Canadian lumber is so heavily subsidized that its export harms America's own woodcutting industry. A lobbying group representing major U.S. lumber producers filed a petition in November 2016 asking the new administration to impose tariffs, in line with President Donald Trump's repeated calls for more protective trade policy in general.

However, the National Association of Home Builders, arguably a more powerful business group, strongly opposes the decision. In a news release responding to the tariff proposal, the NAHB denounced the plan as harmful to American businesses and consumers that still doesn't solve the underlying trade issues.

"NAHB is deeply disappointed in this short-sighted action by the U.S. Department of Commerce that will ultimately do nothing to resolve issues causing the U.S.-Canadian lumber trade dispute but will negatively harm American consumers and housing affordability," said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

According to data from the NAHB, around one third of lumber used in the U.S. last year was imported, with 95 percent of those imports sourced from Canada. The group estimated that in a typical single-family home, which takes about 15,000 board feet of lumber to construct, these new taxes could add nearly $3,600 to the home's sale price.

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