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Canadian Lumber Tariff Would Raise Housing Prices, Builders Say

On April 24, the U.S. Department of Commerce announced it would impose tariffs on imported Canadian softwood lumber. Domestic logging companies have long contended that Canadian companies receive unfair subsidies. In the United States, forests are privately owned, but in Canada, they are owned by the government. American companies have claimed that this allows the Canadian government to charge their cross-border counterparts lower royalty rates for logging than the market-determined rates paid here. Canadian timber companies, the American entities claim, can thus charge low and unfair prices for wood, undercutting U.S. producers.

The Commerce Department agreed with this evaluation, and after their investigation alleged that Canadian producers receive 3 to 24 percent tariffs. The U.S. government will impose equivalent tariffs, company by company, based on the tariffs that they claim the Canadian producers receive. Most will be charged a 20 percent tariff, which will be collected retroactively, going back 90 days.

The National Association of Home Builders (NAHB) has come out strongly against the 20 percent tariff. In an economic analysis, they estimate the tariff will increase the price of the average new single-family home by $1,236. They also estimate a $424 increase in the market value of an average multifamily home, a $945.1 million reduction in reduction in investment in single-family homes, and a $146.1 million reduction in investment in multifamily buildings. The NAHB also estimate a loss of “$498.3 million in wages and salaries for U.S. workers, $350.2 million in taxes and other revenue for governments in the U.S., and 8,241 full-time U.S. jobs.”

According to a statement by the NAHB, the cost of lumber has already increased by 22 percent (adding $3,600 to the cost of a new home) since the beginning of the year.

The U.S. Lumber Coalition, which advocated for the tariff on behalf of American logging companies, has pushed back on NAHB’s estimates of the effect. According to a USA Today interview with Zoltan Van Heyningen, the executive director of the U.S. Lumber Coalition:

“The figures are exaggerated, van Heyningen says. The lumber that’s subject to the tariffs makes up about 2% of production costs of U.S. homes, he says. He estimates the price increase for American consumers would be only about 10% of the price increase estimated by the NAHB. As for jobs, he adds, ‘If you have fair trade, you’d have more U.S. producers using U.S. workers.'”

RBC Capital Markets analyst Bob Wetenhall pushed back on the effects of the tariff, calling them a “papercut.” “It’s not going to affect the real estate market, [and] it’s not going to impact housing prices,” Wetenhall added.

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