Trump's lumber tariffs make home ownership too expensive for more than a million Americans

U.S. tariffs on Canadian softwood lumber appear to be having a significant impact on American home buyers. The average price of a home there has increased by $9,000 since the tariffs came into effect - meaning more than one million Americans are no longer able to get into the housing market.

U.S. duties on softwood lumber causing spike in housing prices, record profits for big Canadian producers

Construction workers work on a new townhouse in Wood-Ridge, N.J., Feb. 26, 2018. (Seth Wenig/The Associated Press)

One of Donald Trump's protectionist "America first" policies is partly to blame for making home ownership too costly for more than one million Americans.

According to the U.S.-based National Association of Home Builders (NAHB), American tariffs on Canadian softwood lumber have caused housing prices in the United States to jump by an average of $9,000 per home, making it impossible for some low- and middle-income Americans to get into the housing market.

"I don't think it's fair," Jerry Howard, CEO of the NAHB, told CBC News in Washington, D.C.

"For every $1,000 increase in the price of a house, 150,000 people are priced out of the market. This is having a serious impact on housing affordability, and it is having a serious impact on the home building sector as an economic force."

Members of the NAHB met with U.S. Commerce Secretary Wilbur Ross on Tuesday, hoping to convince him to end the tariffs.

James Moore, former industry minister and member of the Foreign Affairs Minister's NAFTA Advisory Council, discusses the state of trade negotiations, the threat of auto tariffs and the challenges of dealing with U.S. President Donald Trump. 8:13

In a statement, NAHB Chairman Randy Noel said the group "encouraged the secretary to return to the negotiating table with Canada.

"It is essential that the two sides resume talks and hammer out a long-term solution to this trade dispute that will ensure U.S. home builders have access to a stable supply of lumber at reasonable prices to keep housing affordable for hard-working American families."

Long-term tariff tension

Softwood lumber has been a sore point in Canada-U.S. relations for decades.

Last November, the Trump administration moved forward with tariffs on about 20 per cent on Canadian softwood — to fight what it claimed were "unfair subsidies" from the Canadian government.

The Americans argue Canadian producers are able to sell their product cheaply in the American market because they tend to harvest from Crown land — which typically charges stumpage fees that are lower than the market-determined ones charged by private landowners in the United States.

Canada disputes that claim and has taken legal action against the tariffs, filing formal complaints to the World Trade Organization.

Big profits for big producers

Despite the tariffs, business has never been better for the larger Canadian softwood lumber producers.

Industry insiders say revenues for major employers are the highest they've been in decades, and that there are no signs the strong demand will slow in the near future.

"The demand for lumber has been very very strong, even with a 20.33 per cent duty," said Susan Yurkovich, president of the B.C. Lumber Trade Council.

She said the intense demand for Canadian lumber is being fuelled by a sizzling hot American housing market. Lumber producers in the U.S. are unable to keep up with domestic demand, so home builders have been looking to Canada to fill the gap.

"Right now, we're experiencing a strong market, so we are able to pass those duties on to U.S. consumers," Yurkovich said.

At this time last year — before the tariffs were implemented — the average price of Western SPF lumber was $370 US for one thousand board feet. As of this week, according to Madison's Lumber Reporter, the price has nearly doubled to $652.

"The impact of this is on the U.S. consumer, who is paying higher prices for lumber than they otherwise would," Yurkovich said.

Tariffs like 'a big noose'

The future is not so bright for some small and medium sized lumber operations, which are struggling to stay afloat and say their concerns are not getting enough government attention.

Al Fortune, president of Mid Valley Lumber Specialities in Maple Ridge, British Columbia, said the tariffs are a "big noose around our necks, and it keeps tightening day by day."

"We don't have the luxury of making the high profits like some of those other companies," Fortune said.

When the tariffs first came into effect last fall, Fortune said, lumber prices spiked and demand for his product dropped. He said it wasn't long before he was forced to lay off 75 of the 100 workers at his company.

Business has rebounded somewhat since, and Mid Valley Lumber Specialities is back up to about 60 employees. But Fortune said he fears he will have to announce more layoffs — and he's not the only one.

"There's several companies around B.C. and around Canada that have laid people off and they can't bring them back, mainly because of the tariffs."

More funding support available

When the U.S. first announced it would be moving forward with the tariffs, the Canadian government responded by creating an $867 million support fund for softwood lumber producers.

The bulk of the money is in the form of loans and loan guarantees through Export Development Canada (EDC) and the Business Development Bank of Canada (BDC).

But much of the money has gone untouched to date, due to a lack of demand from Canadian companies.

An EDC spokesman said that only a small portion of the $500 million pool it made available in "commercial financing and insurance solutions" has been requested by producers.

"Since the beginning of the program, EDC has served some 40 companies with more than $100 million in commercial solutions," said EDC spokesman Simon Forsyth.

The BDC has been tapped for similar support measures.

"Since launch on June 1, 2017, the envelope has reached 208 loans for $126.8 (million)," said BDC spokesman Jean Philippe Nadeau.

Other aspects of the government's funding package have been fully utilized, including $63 million for the Forestry Innovation program and $55 million for the Forest Industry Transformation Program.

About the Author

Katie Simpson

Politics

Katie Simpson is a senior reporter in the Parliamentary Bureau of CBC News. Prior to joining the CBC, she spent nearly a decade in Toronto covering local and provincial issues.