US doubles Canadian lumber duties, putting strain on housing and trade

The United States has more than doubled countervailing duties on Canadian softwood lumber to over 35 percent, a move economists say will raise construction costs and further strain housing affordability.

The US Department of Commerce on Aug 8 said it will more than double countervailing duties on Canadian softwood lumber imports, raising them to 14.6 percent from 6.7 percent, after determining Canadian producers receive unfair subsidies.

The increase comes on top of a recent rise in anti-dumping duties to 20.5 percent, bringing the total duty on Canadian softwood to nearly 35.2 percent.

The US move will raise construction costs and add to inflationary pressures, according to Brian Bethune, an economics professor at Boston College.

He said the higher costs will be "extremely difficult to offset", especially as they come alongside higher prices for steel and aluminum.

"All of these factors will negatively impact affordability," he told China Daily.

Bethune noted that the duties will take time to appear in official inflation data. "The tariffs first have to feed through into housing construction costs, and then into rents and owners' equivalent rent, which drive shelter costs."

"The lag, however, could be up to a year, so we won't see much of an impact until mid-2026," he said.

The National Association of Home Builders, in an Aug 8 statement, said the higher duties would worsen affordability problems.

"For years, NAHB has been leading the fight against lumber tariffs because of their detrimental effect on housing affordability," the group said in a statement. "In effect, the lumber tariffs act as a tax on American builders, home buyers and consumers.

"With housing affordability already near a historic low, NAHB continues to call on the administration to carefully consider how placing additional tariffs on lumber and other building materials will raise housing prices and impact housing supply," the statement said.

"The impact of the duties is being shared by businesses (exporters, importers) and consumers. So far most of the impact, approximately two-thirds, has been absorbed by US importing businesses with lower profit margins.

"Only 15 percent has been passed on to consumers. However, the pass-through to consumers will likely increase over time," he said.

On the supply side, he said American producers will not be able to fully fill the gap left by Canadian lumber.

"US producers may have some capacity to increase production, but the supply response is limited by the availability of accessible timber resources," Bethune said.

"Beyond the impact on [Canadian] facilities, I would expect a curtailment in production, where higher cost firms may either take temporary downtime or permanently shutter some more mills," said Harry Nelson, an associate professor of forestry at the University of British Columbia.

He said that Canada, and the province of British Columbia in particular, has long been the higher-cost supplier to the US market.

In an Aug 8 statement responding to the US decision, the BC Lumber Trade Council said the move would have negative consequences on both sides of the border.

"It places unnecessary strain on forestry-dependent regions in Canada while driving up construction costs for American builders and families," said Kurt Niquidet, president of the BC Lumber Trade Council.

He added that without a negotiated settlement, the council will continue to work with the Canadian government and industry partners to defend Canadian interests "through all available legal channels, including proceedings under the United States-Mexico-Canada Agreement."

Nelson said the outlook depends on the broader US economy.

"As the US market is what sets lumber prices overall, the higher the tariffs, the lower Canaidan lumber prices will be relative to the US."

For Canadian consumers, Nelson sees both direct and indirect impacts. "First, the duties create a wedge between domestic and export prices," he told China Daily.

"The bigger the tariffs, the more likely the greater that wedge will be."

The indirect effect, he added, comes from the broader economy. "If overall tariffs and economic uncertainty lead to lower economic activity, housing starts generally in both the US and Canada will come down … and lumber prices overall will trend lower."

Looking ahead, Nelson said Canada needs a more deliberate diversification strategy. "We are too reliant on one partner and one product," he said.

"A well thought-out trade diversification strategy where we invest in building a brand for Canadian wood and wood products around quality and building stable relationships with other trading partners," he said.

gaoyang@chinadailyusa.com