Skip to comments.Tariffs Are Behind Skyrocketing Lumber Prices
Posted on 08/02/2017 9:34:37 AM PDT by Eric Pode of Croydon
Back in April, President Trump slapped tariffs of around 20 percent on the Canadian softwood lumber industry. At the time, I wrote that it would cause lumber prices to rise, citing estimates that prices could increase by around 6.4 percent. Well, it turns out I was wrong, and lumber prices have not risen by around 6 or 7 percent. Instead, theyve risen by much more since the springas much as 25 percent.
One contributing factor for this spike is not hard to see. Tariffs are taxes on the consumer, restricting the consumers options when purchasing a product. The levies make imported lumber more expensive, thus making American lumber a more attractive prospect for reasons not necessarily related to its quality or ease of procurement. It is not surprising that politically well-connected American companies, such as the U.S. Lumber Coalition, were strongly supportive of the import taxes. American lumber companies benefit, but at the expense of American lumber consumers that use the product as an input.
This price spike is occurring as the housing market is suffering. Materials needed to build new homes are becoming more expensive, and as a result, the production costs for homebuilders are increasing. This is resulting in a mismatch between sellers and buyers of homes: there is plenty of demand for new, inexpensive homes, but homebuilders cannot make a profit off homes at the prices that buyers can afford. Buyers want cheap homes, and, thanks in part to high lumber tariffs, homebuilders are less able to provide them.
The result of this has been plummeting confidence among homebuilders. The National Association of Home Builders confidence index has fallen to an eight-month low as home builders face higher supply costs. While builder confidence jumped following the election as President Trump promised lower taxes on corporations and reductions in regulations surrounding homebuilding, compliance with which makes up as much as a quarter of the cost of building a home. While builder confidence still remains high when compared to, for example, the rock-bottom lows of 2008, this recent drop highlights the administrations habit of balancing policies that help businesses and consumers with trade policies that shoot American consumers in the foot.
As my colleague Brandon Arnold rightly pointed out at the time the tariffs were introduced, there are reasons for taxpayers to be concerned even if they do not plan to buy a home in the near future. President Trump has been teasing a plan to use $200 billion of taxpayer dollars to leverage $1 trillion in infrastructure investment. Yet with rising lumber prices causing construction costs to increase significantly, any infrastructure plan will get less bang for its buck. So will we see less bang or more buck? In other words, will Congress fund fewer projects for the same amount of money, or will it fund the same number of projects and spend more money? Either way, taxpayers lose.
The lesson here is not limited to lumber. Tariffs are, by their very nature, financial costs added to the myriad burdens faced by American businesses and consumers at large. As economists continue to overwhelmingly agree, international trade provides a net benefit to both countries that engage in it. Meanwhile, tariffs benefit small, politically favored industries at the expense of American businesses and consumers writ large. The country should seek to repair its damaged trade relationship with Canada and focus on lowering trade barriers, not erecting them.
British Columbia Premier John Horgan says Canada and the United States are close to reaching a softwood lumber trade deal that could come as early as next month.
More Americans working plus non income tax revenue. A win-win.
What POTUS Trump should have did was open up all the National Forests to logging, the eco-twits have ruled the timber ind for far too long.
We should have general tarriffs across the board, like we had for 180 years.
Putting Americans back to work will do more for the housing industry than keeping lumber prices low for the unemployed to wish they could afford.
I was just pricing lumber for a new deck at Home Depot last week. 16 foot 6x6 posts, $44, that sounded pretty cheap to me.
I’ve built a house or two. 24% increase in lumber? I am not seeing that at the lumber yard.....
Isn't that what tariffs are supposed to do?
No one likes taxes.
No one likes tariffs.
Yet each has its place. Both feed the government beast and help make government larger. If we push for smaller government, we can get by with lower taxes and lower tariffs.
Tariffs have the advantage of protecting American businesses and keeping American workers employed. Taxes do neither of these things.
I would support “free trade” if other nations did the same. But they don’t. A lot of nations try to stack the deck and that helps their businesses and hurts our businesses. An increased push for tariffs is really just counter-balancing an unequal situation which has gone on too long.
Sugar destroyed south Florida... we have aquatic death pouring out the east and west canal through Okechobee... and for what? To protect a business that is politically connected... The world price for sugar is $0.10 a pound ,, we pay $0.50 at retail or more... just google “world price sugar wholesale” and the first page is nothing but US sugar interests webpages giving excuses and apologies and telling us why their subsidies are really good for us.
We have been losing large corporations that use sugar to Mexico for a long time now ,, if you make breads , cakes or candies your plant is in Mexico where you can get ingredients at a fraction of the price here.
There is no bigger burden than losing your job because other countries are allowed dump their product in the USA duty free.
I’ve noticed the price of Oreo’s have fallen since moving production to Mexico. /sarcasm
“Tariffs on specific industries and products are corporate welfare, paid for by the American consumer, benefiting political cronies. “
What an idiotic statement.
Cheap foreign imports are taxes on the American worker who are the consumers as their jobs are sent overseas.
How do you expect “consumers” to buy anything if they don’t have jobs??
You are a traitor to your country by wanting cheap imports.
Why don’t you just move to those cheap foreign countries and get it over with??
There is no substitute for a tariff. Especially when every other country applies then to our exports.
some how I haven’t seen your posts recently.
I wanted to ask if you have Netflix?
Hence the term: Free Traitor. Limbots all.....
ALL TAXES ARE TAXES ON CONSUMERS.
Why is this criticism only raised with tariffs?
It’s like everyone in the media works for China.
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