Canada recently became the target of Donald Trump’s mission to “Make America Great Again” when he introduced a heavy tariff—over 20%—on Canadian softwood lumber imports. While the US and Canada have squabbled over lumber prices for many years, Trump seems to have made the lumber trade the newest focus of his campaign, which does not bode well for potential NAFTA negotiations. Fortunately, Maritime provinces have been exempted from these tariffs. However, there is no telling if this decision will be permanent.
Lumber & NAFTA
Currently, exports like dairy and lumber are not included in the current North American Free Trade Agreement, but Trump’s views on free trade and his oath to boost the economy through American-made products does not look promising for future Canadian–US trade relations. While his “America first” party line is an effort to bolster the economy, Americans in need of Canadian softwood lumber will now have to pay a premium.
The Question: What is a Subsidy?
At the centre of these trade disputes is the age-old debate over whether or not the lumber accessed from Crown land is considered a subsidy. While Americans argue that it is, Canadian provinces posit that all lumber is sold at a fair market price and therefore is not artificially low. Maritime provinces have escaped American tariffs so far because most forests are privately owned or otherwise charged a heavy Crown stumpage fee—a fee to harvest timber—that represent a fair market price.
Rates aren’t expected to be finalized until November.
What’s Next for the Timber Industry?
Trump’s decision to introduce heavy tariffs on lumber will negatively impact citizens on both sides of the border. Not only will the industry’s workforce likely be affected, but the price of timber in the US will make homeownership an unreachable goal for some families.