A forklift driver works at a lumber yard near Vancouver, on July 6, 2022.JENNIFER GAUTHIER/The Globe and Mail
To get a sense of the potential impact of Donald Trump’s plans for sweeping tariffs, look no further than the Canada-U.S. softwood dispute.
With Mr. Trump’s election victory and his looming return as U.S. president, his proposal to impose tariffs on all goods entering the United States would slam Canada and other countries, forestry industry experts say.
Since 2017 in the latest phase of the long-running trade war over lumber, softwood companies based in Canada have paid more than $10-billion in U.S. duties for production originating from Canadian sawmills.
Production from U.S. sawmills, including those owned by Canadian-based companies, is exempt from the lumber duties.
Canadian-based producers have descended on the U.S. South over the past dozen years and set up shop in the lumber region, and thereby found a way around the punitive duties for the U.S. portion of output.
In the U.S. Department of Commerce’s latest rate revision in September, the combined countervailing and anti-dumping duties totalled 14.4 per cent for most softwood from Canada, compared with 8.05 per cent earlier this year.
Vancouver-based forestry analyst Russ Taylor said that even without Mr. Trump’s return to the White House, the industry consensus is that U.S. lumber duties would surge to 30 per cent next year. That is based on a historical pattern of higher duty rates whenever there are lower prices in lumber markets, which have been in a slump since the autumn of 2022.
“There’s lots of incentive for the Canadian government to negotiate now because lumber prices are low and the duties are going higher. But the Americans want high duties against Canadians and want them to be squeezed,” Mr. Taylor said in an interview on Wednesday. “Canadians are in a tougher position than they were before the election results.”
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In early 2025, the Commerce Department is expected to announce preliminary rates in its sixth administrative review, which will be based on lumber markets in 2023.
CIBC Capital Markets Inc. analyst Hamir Patel said in a research note last week that Vancouver-based Canfor Corp. CFP-T, which has a majority stake in a producer in Sweden, could face new tariffs in the range of 10 per cent for Swedish lumber shipments into the U.S. market.
Mr. Patel and Mr. Taylor say it is also possible that 10-per-cent tariffs could be added on top of lumber duties already imposed on Canadian softwood.
While Mr. Trump is counting on job creation in the U.S. after slapping on wide-ranging tariffs, Mr. Taylor said there have been other factors that have led to the Canadian invasion south of the border, notably reduced availability of timber supplies in British Columbia.
There has been job creation with new and expanded sawmills in the U.S. South, but American consumers are paying higher prices for lumber as a result of U.S. softwood duties, he said.
Mr. Taylor isn’t optimistic about any breakthrough in 2025 in the softwood battle, which dates back to the early 1980s and is complicated by divergent views on public versus private ownership of forests.
The last time Canada and the U.S. reached an agreement on softwood trade was in 2006. That agreement expired in October, 2015, with no replacement.
“The key thing is that the U.S. itself can’t supply all its demand and it does need to import lumber. Historically, the majority of that has been from Canada,” Kurt Niquidet, president of the BC Lumber Trade Council, said in an interview on Wednesday.
In much of Canada, forests are on Crown land, with buyers paying “stumpage fees” to provincial governments for the right to log. The U.S. government believes it has a better system for soliciting competitive bids for logging rights in forests that are controlled mostly by private owners of timberland.
The powerful U.S. Lumber Coalition has been an effective lobby group and remains suspicious that the bulk of Canadian timberland ownership is in the public hands of provincial governments.
Ottawa, B.C. criticize increased U.S. duties on softwood lumber
The U.S. has alleged that the stumpage 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. It has also imposed anti-dumping duties in response to Canadian lumber allegedly being sold at below market value.
Canadian companies recently controlled roughly 35 per cent of sawmill capacity for softwood in the U.S. South, based on data compiled by Forest Economic Advisors, a consulting firm.
In 2022, Vancouver-based West Fraser Timber Co. Ltd. WFG-T produced more softwood in the U.S. South than it did in Canada, according to Forest Economic Advisors.
It marked the first time that West Fraser’s annual lumber production in the U.S. surpassed its output in Canada.
It takes 70 to 100 years before spruce, pine and fir trees are considered ripe for harvesting in the B.C. Interior. In the milder climate of the U.S. South, the growing season is much faster, taking about 35 years before southern yellow pine trees are harvested.
Over the years, producers with Canadian head offices having U.S. forestry operations included West Fraser, Canfor, Interfor Corp. IFP-T, Tolko Industries Ltd., J.D. Irving Ltd., Western Forest Products Inc. WEF-T and Teal-Jones Group.
