U.S. Places Punitive Tariffs on Canadian Lumber Amid Impasse

(Bloomberg) -- The U.S. confirmed punitive tariffs on imports of softwood lumber from Canada as the two nations remain at an impasse over a trade agreement, although the penalties will be lower than previously indicated.

Final average countervailing duties of 14.25 percent and anti-dumping duties of 6.58 percent will be levied on Canadian producers, the U.S. Department of Commerce said Thursday in a statement. The move follows the government’s decision earlier this year to impose combined duties of as much as 31 percent on shipments from Canadian companies including West Fraser Timber Co. and Canfor Corp.

“While I am disappointed that a negotiated agreement could not be made between domestic and Canadian softwood producers, the United States is committed to free, fair and reciprocal trade with Canada,” Commerce Secretary Wilbur Ross said in the statement.

The imposition of the duties confirms speculation in the Canadian lumber industry that the prospects for a trade deal in the near future are remote.

‘Unfair, Unwarranted’

The duties are “unfair, unwarranted and deeply troubling,” Chrystia Freeland, Canada’s Minister of Foreign Affairs, and Jim Carr, Minister of Natural Resources, said in a joint emailed statement. “We urge the U.S. Administration to rescind these duties, which harm workers and communities in Canada.”

Still, Canadian stocks responded positively since the duties came in lower than many were expecting, said Kevin Mason, managing director of Vancouver-based ERA Forest Products Research. Canfor rose 0.9 percent to settle at C$25.87, the highest since July 2015, while West Fraser rose 1.9 percent.

The trade issue will probably not be resolved in the near term as the renegotiation of the North American Free Trade Agreement has taken center stage, Mark Wilde, an analyst with BMO in New York, said Wednesday in an email.

Canada is the world’s largest softwood lumber exporter and the U.S. is its biggest market. The trade dispute has been an intermittent source of friction for years and was reignited in 2016 when the U.S. lumber industry filed a petition asking for duties. The group alleges Canadian wood is heavily subsidized and imports are harming U.S. mills and workers.

Long Battle

“We’re in for a very long battle” before a final trade deal is reached, ERA’s Mason said. “You’d hate to think you’re going to have another five-year battle like we did last time around, but I can’t see why it’s going to be any different.”

The lumber duties are “unjust and punitive” and Canada will continue to push back against American industry, Prime Minister Justin Trudeau told reporters in Brampton, Ontario. While the tariffs aren’t as bad as they were before, they still “represent a burden on forestry workers and communities right across the country,” he said.

The dispute helped to spark a surge in lumber prices in the U.S., with the increased uncertainty over supplies coming at the same time as a recovery in the American housing market. Lumber has traded at a 13-year high this week and has gained about 35 percent this year, making it one of the best performing commodities, according to data tracked by Bloomberg, although Chicago futures fell by the exchange limit on Thursday.

“We are pleased the U.S. government is enforcing our trade laws so that the U.S. lumber industry can compete on a level playing field,” U.S. Lumber Coalition co-chair Jason Brochu said in an emailed statement. “The massive subsidies the Canadian government provides to their lumber industries have caused real harm to U.S. producers and workers.”

--With assistance from Josh Wingrove and Greg Quinn

To contact the reporter on this story: Jen Skerritt in Winnipeg at jskerritt1@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

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