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, they’ve risen by much more since the spring—as much as 25 percent.
One contributing factor for this spike is not hard to see. Tariffs are taxes on the consumer, restricting the consumer’s 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 administration’s 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.
Nothing is ever good enough for Free Traitors™. WI gave Foxconn a tax incentive to move a huge factory to that state. A huge win but the Free Traitors™ were complaining about giving them a tax break. There is no winning with these greedy bastards.
I'm thinking this is the most astute observation I have read so far in this thread.
That is impossible. It's one OR the other.
Of course they are.
If there is going to be a corporate income tax, we are far better off to have one rate of say 10%, rather than rates varying from zero to 35 percent depending upon who has the best lobbyists.
The purpose of both taxes and tariffs should be simply to raise money to fund the constitutional functions of government.
NOT to try and fine tune the economy from inside the Beltway.
Arguing that because we have a corrupt tax code, we ought to have corrupt tariffs too is like saying that because someone has cancer, he ought to go out and contract Ebola.
Do you even know anything about the move to tariff softwood lumber?
Canadian producers pay nothing to cut trees other than the price of men and equipment. The trees are free.
American producers must pay for the trees, whether they are in Canada or the US.
These tariffs are right and righteous for all those who can about the NATION, as opposed to those who care only about some quaint notion in a book written by Adam Smith.
Puritanical Free Trade and Open Markets have never been, anywhere, at any time.
Ever.
And they never will be.
Brand aside...how can you keep a job and be productive if you can’t drive to work to keep the job? Not everyone is making what you are making apparently. one 3rd are living paycheck to paycheck and TRYING to stay off of welfare.
Fixed.
Thanks, but I don’t claim credit for any genius here. Anyone with three functioning brain cells should have no problem figuring that out.
That’s what I paid last year but most of the treated Lumber is yellow pine from the south not Canadastan.
Offshoring production increases profit margins. It does not lower the retail price. That is an illusion. Labor is just a small component in the cost of production. There is only some much blood that can be squeezed out of the labor turnip.
No, I wanted to recommend a Korean TV show that would indicate to you our competition and a glimpse of globalism that has nothing to do with governance. The award winning show never mentions globalism but the business is un political and truly global in scope.
Mi-seng : Incomplete Life
There in nothing in the US Constitution guaranteeing free trade between the USA and other countries. Actually the opposite is true.
Not a win for all the existing businesses of Wisconsin, who are pulling the wagon in which Foxconn rides.
PS - Where can I get a "Free Traitor™" lapel pin. I want one!!
Whatta bout Canadian maple sugar?
The Koreans whored and bribed their way into the US consumer market. They OTOH live behind one of the highest tariff walls in the world. Big thanks after saving their zipper head butts from a Chinese invasion.
Here’s what will happen next... American unions will lobby to bring American lumber prices up to match the higher import prices and give themselves a raise.
Adam Smith and John Keynes really f-ed up the world.
What I've read on FR says that there's a glut on the housing market, nationally. Isn't that at odds with this statement?
Locally in the southeast, I've not seen a lot of housing startups. BUT, you can't throw a rock without hitting new commercial construction, or remodeling - seems like most restaurants have been doing that starting this spring.
Really locally to me...I pass six abandoned, falling-in gas stations on my commute. Since spring, all of them have been leveled, tanks pulled out, and the lot graded off. No new building yet, but the lots are prepped and ready. I wondered if there was some EPA foolishness that was rolled back, so that someone could finally do something with the land.
It's nice to see things booming again. Been awhile.
Harvesting in some of the national forests would help thin them and make them less vulnerable to forest fires. The same with grazing rights. Grazing eliminates a lot of the brush that feeds the fires
So it is a lie then that Free Traitors™ think tax cuts are good for business. Scum bags all....
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