When President Donald Trump slapped tariffs on Canada’s softwood lumber industry last week, he ignited a trade dispute that was a long time coming. And his actions could impact the local economy far beyond whether our mills or theirs prevail in a disagreement that has spanned decades and may be decided by the World Trade Organization.
The softwood agreement expired in October 2015, and when a new deal still wasn’t reached one year later, the American timber industry cried foul. It accused Canada of “dumping” — that is, selling below market value —its timber into the country, making it impossible for U.S. mills to compete.
The U.S. Lumber Coalition filed a trade complaint with the federal Commerce Department late last year. In an interview at the time, the group’s spokesperson said it was “the direct result of Canada flat-out failing to engage” in the process to reach a new deal. Trump’s Commerce Secretary Wilbur Ross apparently agreed and announced the new tariffs himself.
There are several contributing factors to this long-running conflict, but the largest is the different ways the countries harvest lumber. Canadian timber companies benefit from its government owning the majority of its timberlands and providing trees to its producers at an administered fee, often below market value — whereas in the U.S. most timberlands are privately owned and directly determined by the market.
This may simply be Trump’s opening salvo in his attempt to get better deals with several of our trading partners. Nonetheless, the reaction up north has been apoplectic.
Canada Prime Minister Justin Trudeau called on the president to reject “the baseless allegations” and vowed to “vigorously defend the interests of the Canadian softwood lumber industry.”
If the trade relations worsen, there are no clear winners —at least locally. The Flathead Valley economy is intertwined with Canada’s far beyond the timber industry.
After issuing tariffs on timber and threatening to do the same with dairy, Trump suggested he could pull the country out of the North American Free Trade Agreement altogether (the trade bloc among the U.S., Canada and Mexico). He has since walked back that assertion and said the U.S. would remain in the partnership if it can renegotiate the pact.
Either way, the rhetoric sent the Canadian dollar and Mexican peso plunging. That matters, because the less a loonie is worth, the fewer Canadians visit and invest in Northwest Montana.
The other potential cost is to local builders. The Canadian timber industry is quick to point out that someone constructing a home may be forced to pay more for wood because of the tariffs, pricing out customers. With interest rates still near historic lows, that’s less of a concern, at least for now.
The potential for deteriorating relations is what’s more worrisome.
Something had to give. Since the softwood agreement lapsed, Canada’s market share in the U.S. has jumped from about 20 percent to 30 percent, according to the U.S. Lumber Coalition. It’s essential that the playing field is level for a local industry that is still vital to our region.
Instead of reaching a new deal under the last administration, we’ve now reached a tipping point on trade that has Canada spooked and could have unintended consequences.
Yes, level the playing field. Amicably. Our two countries digging in their respective heels helps no one, especially us.