US authorities move to double tariffs on Canadian lumber despite a meteoric rise in prices and demand

• The US Commerce Department recommended a doubling of tariffs on Canadian softwood lumber last Friday.
• The move comes despite lumber prices being up more than 275% since April of last year.
• "The White House does not care about the plight of American home buyers and renters," National Association of Home Builders chairman Chuck Fowke said.

The US Commerce Department recommended a more than doubling of the tariffs on Canadian lumber last Friday despite a meteoric rise in prices and demand for the commodity.

Specifically, the department recommended the "all others" preliminary countervailing and anti-dumping rate move to 18.32% from 8.99%.

The proposed rates are subject to further review over the next six months before final duties are set sometime in November.

Former President Donald Trump's administration imposed a similar 20% tariff on Canadian softwood in 2018, but lowered it to around 9% late last year after a decision favoring Canada by the World Trade Organization.

The move to increase tariffs on Canadian lumber suppliers comes as lumber prices have risen over 275% since last April alone. Canada's share of the US lumber market sits at around 25% as well, according to the Wall Street Journal.

On May 22, National Association of Home Builders chairman Chuck Fowke released a statement criticizing the move to increase tariffs.

"At a time when soaring lumber prices have added nearly $36,000 to the price of a new home and priced millions of middle-class households out of the housing market, the Biden administration's preliminary finding on Friday to double the tariffs on Canadian lumber shipments into the U.S. shows the White House does not care about the plight of American home buyers and renters who have been forced to pay much higher costs for housing," Fowke wrote.

"The administration should be ashamed for casting its lot with special interest groups and abandoning the interests of the American people," he added.

Canadian authorities also rebuked the newly proposed tariffs.

"US duties on Canadian softwood lumber products are a tax on the American people. They make housing less affordable for Americans and hinder economic recovery from the COVID-19 pandemic," said Mary Ng, a Canadian MP and the minister of Small Business, Export Promotion, and International Trade.

"We will keep challenging these unwarranted and damaging duties through all available avenues. We remain confident that a negotiated solution to this long-standing trade issue is not only possible, but in the best interest of both our countries," she added.

On the other hand, US timber producers applauded the new tariffs on Canadian companies. Jason Brochu, the US Lumber Coalition co-chair, said the Commerce Department's decision represents a move to create a level playing field in the industry.

"A level playing field is a critical element for continued investment and growth for U.S. lumber manufacturing to meet strong building demand to build more American homes," Brochu said in a statement.

"More lumber being manufactured in America to meet domestic demand is a direct result of the trade enforcement, and we strongly urge the Administration to continue this enforcement," he added.

Insider spoke with Stinson Dean, the founder of Deacon Lumber Company, about differing perspectives from experts regarding the newly proposed tariffs.

Dean said he doesn't know how the new tariffs will impact prices, but said that last time a tariff increase was announced, prices skyrocketed, although from much a lower base.

However, Dean also said the "tariff should be judged on its merits and not a kneejerk reaction to the current market," noting that scarcity of supply is the main issue when increasing tariffs, not pricing.

"In my mind, any tax on Canadian lumber incentivizes them to look sell to other markets. The US needs all the supply it can get-and buyers will clearly pay for it-but if it doesn't exist, it brings construction to a halt. Scarcity is the problem, not price," Dean said.

Dean recommended a "ceasefire" from tariffs for the next 12 months to give both sides time to lock in a long-term agreement because the industry needs "all the supply in the world pointed at the US."