Contrary to the rhetoric of the Trump campaign, more disputes in NAFTA have involved the United States vs. Canada than those with Mexico. Most have centered around the import of Canadian softwood lumber, with others around dairy. The disputes go back to the early 1980s.
Now in the White House, the first target of the Trump administration’s “get tough on trade” policy is not Mexico, not China, but our neighbor to the north. The United States intends to impose a 20 percent tariff on Canadian softwood imports (possibly rising to 24 percent). Washington has imposed duties before, based on complaints from American timber companies, but usually the two sides smooth things out until the next complaint comes along.
The heart of the argument is that most Canadian lumber comes from public lands, with Washington arguing that Ottawa and the provincial governments unfairly subsidize it by not charging timber companies enough for harvesting the trees. Canada, of course, denies this.
Americans will get a short course in trade. The country buys 69 percent of its software lumber from Canada. Most of it is used to build houses and apartments at a time when housing affordability concerns are widespread. The tariffs will raise prices here. The American forest-products industry doesn’t have enough capacity to fill the gap, at least in the short run. As a result, the bulk of the cost of the tariffs will fall on homebuyers and renters, as well as potentially dampening construction. Canada would have the right to impose tariffs of its own against the United States.
Most Read Stories
If the tariff eventually led to the creation of a few thousand mill jobs in the United States — and that’s an open question with the automation and consolidation of mills — it would be outweighed by many more lost construction jobs.
What’s different this time is the “economic nationalism” at the heart of the administration. This may only be the beginning of the departure from the liberal trade agenda the United States has pursued since the end of World War II. The tariffs are stiff and apparently kick aside the 2006 softwood agreement. And they further alienate America’s NAFTA trading partners at a time when the administration says it wants to re-negotiate the agreement.
Canada is America’s largest trading partner (Mexico is No. 2). Last year, Canadians purchased $266 billion in merchandise goods from the United States, with transportation equipment being the largest U.S. export. Canada was Washington’s third biggest export destination last year, after China and Japan. It totaled nearly $7 billion in exports from the state. More than $1 billion was in airplanes and parts.