The Trump Administration recently announced a 20 percent tariff on Canadian softwood lumber exports.
The trade dispute over softwood lumber is nothing new. Softwood lumber is what home builders use, and the Canadian market is a big one in the United States. According to University of Idaho forest economics professor Greg Latta, American companies have long felt that Canadians have an advantage because Canadians log on nationally-owned forests – amounting to a government subsidy.
“American companies are arguing that the Canadian government isn’t charging enough for the wood," says Latta, "and that gives Canadian lumber companies kind of an unfair competitive advantage over American companies.”
But Latta says it’s more complicated than that. One reason is that British Columbia flooded the lumber market over the last few years after dealing with a huge die-off of trees infested by bark beetles. Latta says although the 20 percent tariff won’t mean American forests will open to logging – American lumber mills will come out on top through classic supply and demand.
“The demand for lumber isn’t going to change. But the supply of lumber is going to be reduced because of this Canadian tariff. So when the supply is reduced, the price increases. So people are willing to pay more for lumber because there’s less of it around.”
And as that supply shrinks, homebuilders will have to pay more for softwood lumber – transferring those costs to home owners. The economist says there are some examples of companies that both win and lose in this scenario – including one company that logs in north Idaho but also has mills across the border.
Find reporter Frankie Barnhill on Twitter @FABarnhill
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