Canadian sawmills prepare for potential U.S tariffs on top of existing softwood lumber duties
Canadian sawmills are bracing for potential U.S. tariffs to be added on top of existing lumber duties, warning American customers of looming price increases.
The U.S. Department of Commerce already slaps punitive duties on softwood lumber shipped from Canada into the United States, levied at a current rate of 14.4 per cent for most Canadian producers.
U.S. president-elect Donald Trump said in November that he would impose 25-per-cent tariffs on all goods imported from Canada and Mexico soon after he takes office on Jan. 20.
“A number of Canadian lumber companies are now advising customers that they will add 25 per cent to lumber exports to the U.S.,” if the threatened tariffs are implemented, Vancouver-based forestry analyst Russ Taylor said in a research note. “They have no alternative but to increase prices by the 25 per cent to cover the potential tariff.”
The details of how any tariffs would be applied, or which parties would be on the hook for paying them, are unclear.
The last time Canada and the U.S. reached an agreement on softwood trade was in 2006. That agreement expired in 2015 and has not been replaced.
The Commerce Department is slated to release its next preliminary duty rates on lumber in early May, or 90 days later than originally planned. Analysts say U.S. duty rates imposed on Canadian softwood could more than double later this year and reach 30 per cent. If new tariffs are applied, that would mean a rate of tariffs and lumber duties totalling 55 per cent.
Last week, Mr. Trump said the U.S. has plenty of forests with timber supplies, and he dismissed the role of Canadian softwood. “We don’t need their lumber. We have massive fields of lumber. We don’t need their lumber,” he said.
But Kurt Niquidet, president of the BC Lumber Trade Council, said the U.S. is far from being able to meet its domestic softwood demand. “The U.S. can’t be self-sufficient and so they do need to import lumber,” Mr. Niquidet said in an interview.
Canadian producers recently accounted for 24 per cent of total U.S. lumber consumption, compared with nearly 33 per cent in 2016. Production has increased at U.S. sawmills, including those owned by companies with head offices in Canada. As well, timber supply constraints in British Columbia have crimped lumber output in the province.
Even though the U.S. buys softwood from countries such as Germany, Sweden and Austria, the largest foreign supplier to the U.S. by a wide margin remains Canada.
“We require Canadian lumber partnerships for the U.S./Canadian lumber industry to keep running smoothly,” Nic Wilson, chief executive officer of the Denver Mass Timber Group Summit, said in a post on LinkedIn.
While lumber prices have risen since mid-2024, they are still down almost 70 per cent from the record highs attained in the spring of 2021.
Most forests in Canada are on Crown land, where buyers pay “stumpage fees” to provincial governments for the right to log.
The U.S. has alleged that the fees are too low, and that they amount to government subsidies. The U.S. has levied countervailing duties in retaliation, focused on the stumpage system. Washington has also imposed anti-dumping duties in response to Canadian softwood allegedly being sold at below market value.
The issue of Canadian softwood shipments into the U.S. is not a direct part of the North American free-trade agreement, nor its successor, the U.S.-Mexico-Canada Agreement. But under NAFTA’s Chapter 19 and the USMCA’s appeal process, Canada and the U.S. agreed to set up trade panels to settle disputes. The Canadian government is continuing to challenge lumber duties through the USMCA, which took effect in mid-2020.
The softwood dispute dates back to the early 1980s. In the latest round of the trade fight, the U.S. started imposing duties on Canadian lumber in 2017. Over the past eight years, Canadian producers have paid more than US$7-billion in duties, with punitive rates that have fluctuated from about 8 per cent to more than 20 per cent.
This article was first reported by The Globe and Mail
