On Monday, U.S. President Donald Trump announced an increase in tariffs from 3% to 24% on softwood lumber imports from Canada. Most lumber companies in Canada are state-owned and subsidized by the Canadian government, and the U.S.-Canada dispute over softwood lumber is decades old (The New York Times). American mills recently filed a complaint, and the U.S. Commerce department responded by imposing a tariff equivalent to the subsidy amount (24%) on five Canadian companies. For all other Canadian lumber companies, the tariff rate was set at 20%.
According to the Wall Street Journal, Commerce Secretary Wilbur Ross claimed it had been a “bad week for U.S.-Canada trade relations.” This statement also reflects President Trump’s complaints about Canada’s system of protections on its dairy industry, leading to unfair treatment of American dairy farm workers.
Both softwood lumber and the dairy industry were left out of the initial North American Free Trade Agreement in 1994, so it is easy for the U.S. to bring up the issues without formal negotiations (Reuters).
In Canada, the country is considering some sort of aid package to the companies that will be hit by the tariff (Bloomberg). In Quebec, 60,000 people work in the forest-products industry, and the province is putting in place a program of loan and loan guarantees that is expected to be worth 300 million Canadian dollars.
In the past, disputes around the softwood lumber industry were always won be Canada. However, if it becomes a legal fight, it is likely that the process will take a few years to be settled. Stay up to date with current U.S.-Canada trade relations by following Mercatura Global on Twitter.