Trump orders probe into U.S. lumber imports that could heap more tariffs onto Canada
U.S. president also wants to boost U.S. production by streamlining permit process
U.S. President Donald Trump on Saturday ordered a new trade investigation that could heap more tariffs on imported lumber, adding to existing duties on Canadian softwood lumber and 25 per cent tariffs on all Canadian and Mexican goods due next week.
In his third new tariff probe in a week, Trump signed a memo ordering Commerce Secretary Howard Lutnick to initiate a national security investigation into U.S. lumber imports under Section 232 of the Trade Expansion Act of 1962. The trade law is the one Trump also used to impose tariffs on global steel and aluminum imports.
The probe covers derivative products made from lumber that could include furniture such as kitchen cabinets, which in some cases are made of U.S. lumber that had been exported.
The order said the Commerce Department investigation must be completed within 270 days.
Trump also ordered new steps within 90 days to increase the domestic supply of lumber by streamlining the permitting process for harvesting lumber from public lands and improving the salvage of fallen trees from forests and waterways.
Canadian lumber industry braces for potentially crippling tariffsThe order calls for new or updated agency guidance to facilitate increased timber production, including quicker approvals for forestry projects under the Endangered Species Act.
White House trade adviser Peter Navarro said the lumber import probe would counteract the actions of big lumber exporters, including Canada, Germany and Brazil, which he said were "dumping lumber into our markets at the expense of both our economic prosperity and national security."
"That stops today with a pair of Trumpian actions designed to both bolster supply of and demand for American timber and lumber," he told reporters on a conference call ahead of the signing.
A White House official said that increasing reliance on imported lumber represents a possible national security risk partly because the U.S. military consumes significant quantities of lumber for its construction activities and because increasing dependence on imports for a commodity with ample domestic supplies is a danger to the U.S. economy.
Employees work at a lumber yard in Halifax in May 2017. (Darren Calabrese/The Canadian Press)
The official did not provide details on a proposed tariff rate under the Section 232 lumber probe, but Trump earlier this month told reporters that he was thinking about imposing a 25 per cent tariff rate on lumber and forest products.
The official said any tariffs resulting from the probe would be added to the existing 14.5 per cent combined anti-dumping and anti-subsidy duties on Canadian softwood lumber.
These were the result of a long-running U.S.-Canada trade dispute over Canada's low stumpage fees on public lands, which Washington argues is an unfair subsidy. Most U.S. lumber is harvested from private land at market-determined rates. Home builders have long criticized the tariffs as raising lumber prices and contributing to home price inflation.
Canada officially challenging 'unfair' U.S. duties on softwood lumberThe official said the new lumber duties would also stack on top of Trump's threatened 25 per cent general U.S. tariffs on all Canadian and Mexican goods that are scheduled to take effect on Tuesday unless Trump is persuaded by the two countries' efforts to secure their borders and halt fentanyl trafficking.
The new tariff probe follows Trump's order on Tuesday for a new Section 232 investigation into copper imports, aimed at rebuilding U.S. production of a metal critical to electric vehicles, military hardware and the power grid.
On Feb. 21, Trump ordered U.S. Trade Representative Jamieson Greer to revive investigations aimed at imposing tariffs on imports from countries that levy digital services taxes on U.S. technology companies. Canada would again be in the firing line for such penalties, along with France, Britain, Italy, Spain, Austria, India and Turkey.
N.B. forestry towns face tariff triple threat
N.B. forestry towns on edge as U.S. tariffs, duties pile up
Trump’s new measures just the latest protectionist moves adding to cost of Canadian wood for U.S. buyers
Like other New Brunswick forestry towns, the rural community of Kedgwick is on edge.
The economy of the municipality tucked in the middle of the woods in the northwest of the province relies on two major sawmills, J.D. Irving Ltd. and Groupe Savoie, and several smaller forest operations.
"The forest is the blood that runs in our veins," says Mayor Éric Gagnon.
"Around here we know what to do with a tree. Trees are really important to us. Just about the entire population, if they don't work directly with wood, a part of their work comes from it."
So Gagnon has been paying attention to every twist and turn in the Trump tariff saga while staying in touch by phone with the operators of the local mills.
"We're checking in with them every day or two, just to stay up to date … it's a very live issue," he said.
"It's hard to predict the unpredictable with what's happening with our American friends. Mr. Trump has a bit of a hard time staying on track."
J.D. Irving Ltd. has one of two major sawmills in Kedgwick that are major parts of the local economy. (Sophie Langlois/Radio-Canada)
About 24,000 New Brunswickers work in the forestry sector, and 80 per cent of the industry's output — softwood and hardwood lumber, pulp and paper, shingles, fibre and strand board — goes to the United States.
Irving, the industry group Forest NB and the New Brunswick Lumber Producers released a fact sheet last month on the threat represented by the tariffs, estimating that seven out of 10 municipalities in the province are home to at least one forestry business.
They were not giving media interviews this week.
"At this time it is too early to determine the full level of impact these tariffs will cause," Forest NB spokesperson Andy Tree said in an email statement.
"We continue working to understand the details of what the announced tariffs will mean for forest sector operations across the province."
J.D. Irving issued a nearly identical statement.
Some of the province's wood exports were already under American protectionist pressure before Donald Trump returned to the White House.
J.D.
Irving, which operates a large pulp mill in Saint John, was one of the
forestry groups that released a fact sheet detailing how tariffs would
threaten New Brunswick communities. (CBC)
In 2017 the U.S. added New Brunswick to the provinces whose softwood exports are subject to anti-dumping and countervailing duties.
U.S. competitors lobbied for the move because, they argued, increased harvesting on Crown land amounted to a larger public subsidy, which made the province's lumber artificially cheap for American buyers.
The combined duty rate is reviewed annually and this year is 14.4 per cent for all New Brunswick mills except Irving, which has an 11.5 per cent rate.
This week Trump's Commerce Department filed a notice to increase one part of that combined rate, which if adopted would increase the combined rate to 26.8 per cent for most mills and 23.9 per cent for JDI.
The administration has also launched an investigation into imposing additional duties on national security grounds.
Add the 25 per cent tariffs and it amounts to a crushing increase to the cost of Canadian softwood sold in the U.S.
"To put it simply, there's really not many Canadian softwood lumber mills that are going to be able to ship profitably into the U.S. market at the existing prices," said Dustin Jalbert, a wood products economist with the U.S. price forecasting firm Fastmarkets.
The market share for Canadian wood in the U.S. has dropped from 34 per cent in 2000 to 23 per cent last year because of multiple factors, including the duties, Jalbert said.
While
New Brunswick exports 80 per cent of forestry products to the United
States, the share of Canadian wood in the U.S. market has dropped in
recent decades. (Nicolas Steinbach/Radio-Canada)
But there still isn't enough American supply to completely replace Canadian wood, even at higher prices, and the U.S. industry couldn't ramp up to meet that demand for three to five years, he added.
"That's when I come back to the fact that market prices have to go higher to at least keep some of that Canadian supply staying into the market. So you know this is going to come to a cost of the consumer and home builders."
Irving and another major forestry company in the province are facing another challenge thanks to the Trump tariffs.
Twin Rivers Paper Company ships pulp from its Edmundston mill in a pipe across the U.S. border to its Madawaska, Maine paper mill.
The company would not comment this week on how the tariffs might affect the economics of that operation.
Irving wouldn't comment either on what the tariffs mean for the pulp it sends to the $470 million US tissue plant it opened in Macon, Ga., in 2019.
The Macon plant has already seen two expansions, the latest of which will bring employment to more than 500 people, according to a news release from the Macon area economic development authority.
Irving has a number of current job listings for the plant and would not say whether it could shift production from its New Brunswick tissue plants to Georgia to avoid the Trump tariffs.
The Holt government announced a $40 million "competitiveness and growth program" this week to help large New Brunswick companies that depend on exports, along with another $30 million to help companies diversify their markets and mitigate tariff impacts.
Gagnon said he's not sure that's enough to blunt the impact on his municipality, given how deep the industry is embedded there.
"Every part of the forestry industry, we do it here in Kedgwick, so every time there's a crisis, we're affected," he said.
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