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Lumber prices in the United States (U.S.) continue to rise with the recent announcement by the Trump administration to charge countervailing tariffs1 on imported softwood lumber from Canada. Lumber prices in the U.S. began to increase at the end of 2016, when the 2006 softwood trade agreement between the U.S. and Canada expired. The end of the agreement and the anticipation of the softwood tariff have been blamed for increasing lumber costs of more than 20 percent. The National Association of Home Builders (NAHB) also reports that because of the higher lumber costs in the first part of the year, a single-family home, which requires 15,000 board feet to construct, now costs almost $3,600 more to build. Commercial buildings that are framed in wood, will see similar increases. The addition of a tariff on imported softwood lumber from Canada is predicted to further contribute to the trend of rising softwood lumber prices in the U.S.
Trump’s countervailing tariffs on Canadian softwoods range from 3 to 24 percent and are retroactive on imports dating back 90 days. Trump justifies the countervailing tariff on unsubstantiated claims that Canadian softwood producers are subsidized by the Canadian provinces. The subsidies are in the form of low royalty rates for cutting trees on government owned land in Canada. Trump claims this is an unfair advantage over softwood producers in the United States, where forest lands are mostly held by lumber companies. The U.S. Department of Commerce determined the tariffs based on claims that Canadian softwood producers are receiving subsidies worth 3 to 24 percent.
According to the National Association of Home Builders (NAHB), the countervailing tariff on Canadian lumber imports will increase the cost of lumber an average of 6.4 percent. The NAHB also estimates the tariff will increase the price of an average, new single-family home by another $1,236. The large U.S. softwood producers and lumber mills will profit from this countervailing tariff. Home builders and commercial building owners all stand to loss under the current Trump Canadian softwood lumber tariff.
Contractors in the U.S. are dependent on lumber imports for wood construction. Thirty-three percent of the lumber used in the United States is imported. More than 95 percent of the imported lumber comes from Canada. Ninety percent of the wood used in framing is softwood lumber. According to the NAHB chair Granger MacDonald, imports are necessary because American mills do not produce enough softwood lumber to meet the demands in the U.S.
Producing enough lumber at a reasonable price to meet the nation’s demand is vital to the building industry. There are several suggested ways to increase U.S. production of lumber: boost domestic production of lumber from publicly owned lands, reduce exporting lumber sales and increase logging of federal forests in an environmentally sustainable way. These suggestions will help to keep lumber prices down. A softwood tariff against Canada increases the cost of wood, which ultimately is passed on in the form of increased material costs for new construction.
Contractors, architects and builders can avoid the volatility and increasing costs of lumber by choosing an alternative to wood framed walls, like the innovative Bautex™ Wall System. The Bautex Wall System saves construction time and costs. Bautex Wall System also has significant advantages over wood construction.
Lumber prices in the U.S. are on the rise as the U.S. and Canada continue to struggle with a softwood trade agreement and the recently imposed tariff by the Trump administration. The increase in lumber prices is predicted to have a negative impact on the U.S. building industry. It may be time for builders and architects to cut their dependency on wood construction and consider insulated concrete blocks instead. The Bautex Walls system’s high performing insulated concrete blocks provide an alternative to traditional wood construction. Bautex Blocks are also more energy efficient and fire, wind and moisture resistant than buildings construction with wood.
Countervailing duties are tariffs (tax,fee) levied (imposed, charged) on imported goods to offset subsidies given to producers of the goods from their government. Countervailing duties are meant to help producers of a product be competitive against foreign producers of the same product who can sell it at a lower price because of the help (subsidy) they receive from their government. A subsidy is money given by the government to an industry for the purpose of keeping the price of that industry’s service or product low or competitive.