As U.S. trade representatives meet this week with their Canadian and Mexican counterparts to review progress on the new North American free trade agreement, they are under pressure from home builders to cut U.S. tariffs on Canadian lumber.
Shortages of softwood lumber amid soaring U.S. housing demand and mill production curtailed by the COVID-19 pandemic have caused prices to triple in the past year, adding $36,000 U.S. to the average cost of a new single-family home, according to estimates by the National Association of Home Builders (NAHB).
Republican lawmakers have taken up the builders' cause, asking during hearings in Congress last week to eliminate the 9% tariff on Canadian softwood lumber imports.
Senator John Thune said that high lumber costs are "having a tremendous impact on the ground" in his state of South Dakota and putting homes out of reach for some working families.
The Trump administration imposed 20% duties in 2018 after the collapse of talks on a new quota arrangement but reduced the level to 9% in December 2020.
On Friday, White House economic adviser Cecilia Rouse said the Biden administration was weighing concerns about commodity shortages and inflation as it reviews trade policy. The current tariffs are allowed under the U.S.-Mexico-Canada Agreement on trade, which permits duties to combat price dumping and unfair subsidies.
The U.S. Commerce Department has ruled that lumber from most Canadian provinces is unfairly subsidized because it is largely grown on public lands with cheap harvesting fees set by Ottawa. U.S. timber, by comparison, is mainly harvested from privately-owned land.
U.S. trade representatives are expected this week to raise the lumber issue with Canadian Trade Minister Mary Ng at the first meeting of the USMCA Free Trade Council, a body that oversees the trade deal between the U.S., Mexico and Canada.
