Trump announced tariffs on Canadian softwood on Monday, prior to a Commerce Department statement indicating tariffs of between 3 percent and 24.1 percent would be imposed on five Canadian importers of lumber into the United States: West Fraser Mills, Tolko Marketing and Sales, J.D. Irving, Canfor Corporation, and Resolute FP Canada and West Fraser Mills. Smaller Canadian softwood importers will be charged an import duty of about 20 percent.
Canadian exports of softwood lumber to the United States in 2016 were valued at $5.6 billion last year, the Commerce Department reported. U.S. lumber companies have long accused Canadian firms of receiving unfair subsidies from the Canadian government. The duties were imposed to equalize competitiveness for U.S. lumber companies, and the Commerce Department statement said the tariffs were proportionate to subsidies allegedly offered by the Canadian government.
Canadian Prime Minister Justin Trudeau called the tariffs "unfair" and spoke to Trump in a phone conversation the White House said was "amicable."
Commerce Secretary Wilbur Ross defended the tariff decision during the White House's press briefing on Tuesday.
"They are a close ally, they are an important ally, generally a good neighbor," he said. "That doesn't mean they don't have to play by the rules. Things like this I don't regard as being a good neighbor, dumping lumber."
During his campaign, Trump promised to liberally use tariffs on imports, notably from Mexico and China. The announcement Monday is likely to lead to lawsuits and a standoff between the United States and Canada, which could lead to a broader trade war, CNN reported Tuesday.
The United States has decried Canadian subsidies on lumber since the 1980s, and a 30 percent U.S. tariff at the time cost 30,000 jobs in Canada, the timber companies said. The matter was twice taken to the World Trade Organization, which sided with Canada both times.
U.S. lumber officials praised Trump's move.
"Today's ruling confirms that Canadian lumber mills are subsidized by their government and benefit from lumber pricing policies," Cameron Krauss of the U.S. Lumber Coalition said.
Canadian stakeholders were angered, with Resolute denying it is subsidized. The Canadian dollar fell to a four-month low against the U.S. dollar after Trump's announcement, trading at 71.80 cents.
|Commerce Secretary Wilbur Ross answers questions from the media during the daily White House briefing on Tuesday. The administration announced a tariff on Canadian lumber. Photo by Pete Marovich/UPI|
Trump slaps first tariffs on Canadian lumber
The Trump administration is hitting Canada with stiff tariffs of up to 24% on lumber shipped into the United States.
These are the first tariffs imposed by President Trump, who during his election campaign threatened to use them on imports from both China and Mexico.
The decision on Monday evening is bound to lead to a standoff and could stoke fears of a trade war between the U.S. and Canada, two of the world's largest trade powers.
Commerce Secretary Wilbur Ross said the tariffs, or taxes, announced Monday evening were being imposed after trade talks on dairy products fell through.
"It has been a bad week for U.S.-Canada trade relations," Ross said in a statement.
Trump's tariffs come as the U.S., Canada and Mexico prepare to renegotiate NAFTA, the 1994 free trade agreement.
Trump has directed almost all of his NAFTA criticism at Mexico, which makes this decision even more surprising.
When Canadian Prime Minister Justin Trudeau visited Trump in February, Trump said he only expected to be "tweaking" the U.S.-Canada trade relationship.
But his tune changed Tuesday morning.
"Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!" Trump tweeted.
The tariffs -- also called duties -- ranged from 3% to 24% on five specific Canadian lumber companies. For all other Canadian lumber companies, there's a nearly 20% tariff on exports to the US.
The five firms were: West Fraser Mills, Tolko Marketing and Sales, J.D. Irving, Canfor Corporation, and Resolute FP Canada. West Fraser Mills will pay the highest duty of 24%.
The duties were imposed to create a level playing field for American lumber companies.
U.S. lumber companies allege that Canadian firms are provided with unfair subsidies by the Canadian government.
Canadian exports of softwood lumber to the United States were valued at $5.6 billion last year, according to the Commerce Department.
The Commerce Department said the duties are preliminary and a final determination will be made in September. Ross said during a press conference Tuesday that the tariffs are effective immediately. In fact, they will apply retroactively and duties will will be collected from 90 days ago, when the U.S. administration first warned Canada.
The administration didn't say why they went after five specific firms or why the others had to pay the 20% tariff. The Commerce Department only said the duties were commensurate to the subsidies the companies received from the Canadian government.
Canadian firms immediately denounced the decision.
"Managed trade only serves to benefit large timber barons in the U.S. while adversely impacting U.S. consumers and millions of hard-working Americans in the housing sector," a spokesperson for Resolute said in a statement. One firm declined to comment and three others didn't immediately respond.
Canadian leaders also criticized the move.
"The government of Canada disagrees strongly with the U.S. Department of Commerce's decision to impose an unfair and punitive duty," Canada's Minister of Foreign Affairs, Chrystia Freeland, and Natural Resources Minister Jim Carr said in a joint statement.
The lumber dispute isn't new, and it's not the first the U.S. has imposed tariffs on Canadian lumber.
In fact, it goes back decades. U.S. lumber companies started alleging in the 1980s that Canadian companies have been unfairly subsidized by their government. In 2002, the U.S. imposed a 30% tariff on Canadian softwood lumber, which Canadian firms claimed cost 30,000 jobs at the time.
Canada has consistently denied it subsidizes its lumber companies. The World Trade Organization sided with Canada in 2004 and the two sides came to a temporary agreement in 2006, which expired last October.
Despite the agreement, U.S. lumber firms continued to allege that their Canadian counterparts had an unfair advantage which allowed them to sell their lumber in the U.S. market at prices American firms couldn't sell at.
U.S. firms declared victory Monday night.
"Today's ruling confirms that Canadian lumber mills are subsidized by their government and benefit from lumber pricing policies," Cameron Krauss, legal chair for the U.S. Lumber Coalition, said in a statement.
Resolute, the Canadian lumber firm, denied it is subsidized. The Canadian officials called the subsidy allegations "baseless and unfounded."
The move came after there was no breakthrough in U.S. talks on Canadian dairy tariffs. Canada has long taxed U.S. diary products. Some U.S. milk exports, depending on the fat content, face tariffs as high as 292%, according to Canada's Agriculture Department.
The Canadian milk tariffs were grandfathered into NAFTA, one of the few areas of trade where major tariffs still exist.
That could change when Canada, Mexico and the US begin renegotiating NAFTA, a trade deal under pressure in the Trump era.
Trump slaps tariffs on Canadian lumber imports, escalating trade tensions
The Trump administration is slapping hefty duties on billions of dollars of lumber imported from Canada, marking an escalation of trade tensions ahead of the president’s promised effort to overhaul the North American Free Trade Agreement.
The new duties came amid sharp rhetoric by Trump and his senior officials critical of NAFTA, first focused on Mexico and more recently on Canada, the largest purchaser of U.S. exports. In a tweet Tuesday, Trump railed against Canada’s protected dairy industry.
“Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!” he said. Opening Canada’s dairy market is expected to be a major issue of contention in the NAFTA re-negotiations.
Later in the day, the president told reporters: "People don't realize Canada's been very rough on the United States...they've outsmarted our politicians for years."
Dairy and lumber are sensitive industries in the heartland and rural parts of America, and any moves to strengthen those domestic constituents could help the administration garner congressional support for its broader trade policy objectives. The administration’s draft letter to Congress outlining its objectives for NAFTA renegotiations was met with a largely tepid response last month.
“I doubt it will be that helpful in teeing up broader NAFTA negotiations with the Canadians, but one thing it will do is rally key industry and political constituencies,” said Nate Olson, a trade expert at the Stimson Center, a think tank in Washington.
Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, welcomed the administration's lumber ruling. His constituents in the Pacific Northwest had been among those pushing for stronger action on Canadian lumber.
This "announcement sends the message that help is on the way," he said.
During a White House briefing Tuesday, Commerce Secretary Wilbur Ross took a softer tone, calling Canada an “important ally” and “good neighbor.”
But Ross, who is expected to take a leading role in renegotiating NAFTA, said that the inability of the two nations to settle the lumber dispute speaks to the trade pact’s shortcomings.
“If NAFTA were functioning properly, you wouldn't be having these kinds of very prickly, very unfortunate developments back to back. So in that sense, it shows that NAFTA has not worked as well as it should,’’ he said.
The U.S. softwood lumber industry has long complained that competing imports from Canada are subsidized by provincial governments, giving Canadian lumber firms an unfair pricing advantage.
Softwood lumber is used primarily for home building. Imports from Canada today account for about a third of the market in the U.S.
The Commerce Department, in announcing its preliminary ruling late Monday, said that so-called countervailing duties ranging from 3% to 24% would be applied retroactively on five Canadian lumber exporters.
Overall the duties would average about 20% and could amount to a total of around $1 billion. Additional penalties could be levied if Commerce determines Canadian lumber is being dumped into U.S. markets.
The National Assn. of Home Builders estimated that while the new tariffs would increase output for U.S. producers, they would add $1,236 to the price of an average single-family home and lead to a loss of nearly $500 million in wages for American workers.
“This will have an impact on housing,” said Robert Dietz, chief economist at the home builders’ group
U.S. lumber representatives disputed that the duties would have a material impact on home prices. They applauded the Trump administration action, saying that enforcing fair trade laws and leveling the playing field could increase the domestic industry’s employment.
About 360,000 people work in sawmills and other jobs linked to the industry, such as truckers hauling wood, according to the U.S. Lumber Coalition.
The dispute over softwood lumber between the two countries spans decades. American lumber mills complain that most of the timber used by Canadian rivals is bought from government forests at below-market prices.
The U.S. lumber industry filed a complaint last fall with the Commerce Department after a year of unsuccessful negotiations between U.S. and Canada following the expiration of a bilateral agreement on softwood lumber.
The investigation was initiated under the Obama administration, and the Commerce Department’s ruling was issued Monday to meet the deadline for reporting a preliminary finding on the case.
Despite the Trump administration’s spotlight on the tariffs and messaging that it was part of stepped-up enforcement on trade, analysts at Barclays Bank said the new tariffs on Canadian lumber were not unusual and that “any administration would likely have had to take action in response to the trade association’s complaint.”
The U.S. and Canada could still reach a negotiated settlement that could result in a removal of the tariffs, the analysts said.
The Canadian government called the new duties “unfair and punitive,” and said the industry would challenge the ruling through legal avenues. Canada could file suit with the World Trade Organization. Canadian officials argued that the tariffs would hurt U.S. home builders and ultimately American consumers.
Zoltan van Heyningen, executive director of the Lumber Coalition, called that claim “completely bogus.” He said only 2% of the cost of an average $343,000 new house stems from lumber materials.