Duties on Canadian lumber have helped U.S. production grow while B.C. towns suffer. Now, Trump's tariffs loom

As many Canadian businesses are looking anxiously to what a Donald Trump presidency and his promise of increased tariffs on imported goods could mean for their bottom line, those working in B.C.'s lumber industry already have a sense of the impact: lost jobs, devastated towns and an uncertain future.

While Donald Trump has promised a 10 per cent tariff on goods imported into the United States, Canadian softwood lumber sold in America is already hit by duties that doubled under Joe Biden's presidency and are forecast to double again in2025.

Meanwhile, production of the same product in the United States has increased, bringing with it new jobs and investment sometimes funded by the same companies that are closing up shop in Canada.

WATCH | Increase in duties hitting B.C. lumber industry:

U.S. nearly doubles duty on Canadian softwood lumber

3 months ago

Duration 2:22

Members of B.C.'s lumber industry are urging Ottawa to fight harder in Canada's ongoing softwood dispute with the United States. Their calls come as the U.S. plans to nearly double duties on Canadian softwood lumber. As Jon Hernandez reports, wood manufacturers in B.C. say they're among businesses hit the hardest.

For example, Canfor, whose headquarters are in Vancouver, recently spent $73 million U.S. purchasing new operations in Arkansas, citing access to a "high-quality globally competitive timber supply." Thedeal was closed in August, the same month the U.S. Department of Commerce announced it would nearly double theduty it charges on Canadian softwood lumber imports from 8.05 per cent to 14.54 per cent.

Weeks later,Canfor said it was closing mills in Vanderhoof and Fort St. John, B.C., blaming, in part, the "punitive" tariff hike.

All told, hundreds of B.C. workers have either lost or will be losing their jobs by the end of the year, dealing a major hit to the communities they support.

A trade dispute dating back to Ronald Reagan

Softwood is the term used for board products made of conifer trees such as spruce and pine, which are generally more flexible than hardwood and are used in the construction of homes and buildings.

In Canada, the bulk of softwood exports goes to the United States, representing over halfthe market for the more than $10 billion industry, which is largely centred in B.C.

But multiple factors have seen jobs in the province disappear in recent years,including a decline in harvestable timber due to the mountain pine beetle epidemic and forest fires. Also top of mind are protectionist measures taken by the United States making it more difficult for softwood produced in Canada to be sold across the border.

WATCH | Canada prepares for trade under Trump:

How Canadian businesses are reacting to Trumps tariff threats

4 days ago

Duration 2:19

Some of Canadas biggest industries are already strategizing on how to deal with U.S. president-elect Donald Trump's threats to impose stiff tariffs on all goods entering the U.S. Economists say Canadas GDP could be cut by as much as five per cent.

It's a risk that has not gone unnoticed by politicians and policymakers in B.C.

"America is B.C.'s largest trading partner and our closest international ally," wrote provincial Conservative Leader John Rustad in a post on X congratulating Trump on his win this week. "Now, B.C.'s number #1 priority must be to push America for progress on ending punitive softwood lumber tariffs."

"Timber is our biggest export," said Laura Jones, CEO of the Business Council of B.C. And while a tariff would be a problem for most industries, she said the impact on softwood lumber is "almost in a different league that could get worse, if one could imagine it getting worse."

B.C.'s governing party, the NDP, has also called the U.S. duties "punishing" and has repeatedly called for them to be repealed.

But they are popular with producers in the United States, with the U.S. Lumber Coalition saying their imposition "substantiates that Canada continues to subsidize and dump its softwood lumber products into the United States."

The argument from south of the border, dating back to the 1980s, is that the pricing system used in Canada is unfair. In places like B.C., the government sets so-called stumpage fees for timber harvested on publicly-owned Crown land.

For producers in the United States, this amounts to asubsidy when compared to the market rates they have to pay.

At times, long-term agreements have been reached between the two countries, most recently with the 2006 Softwood Lumber Agreement which expired in 2015 and has not successfully been renegotiated.

Since then, new dutieshave been imposed under both Trump in his first term as U.S. president, and Joe Biden, who has been in power during the most recent hikes.

At the same time, softwoodproduction in B.C. has declined, while in the United States, it has soared. Industry analysis group Fastmarkets says U.S. softwood production is on track to hit its highest level since 2005 and is set to outpace Canadian production for the first time since the 1970s, according to a report from Bloomberg.

And B.C.companies are following the trend:Both Canfor and West Fraser, whose headquarters are in Vancouver, now operate more mills in the United States than in Canada as they shut down or curtail operations at home.

While that's a hit to British Columbia, companies in the United States welcome it as a win: "Milling more lumber from American trees by American workers to build American homes also creates more American jobs in typically rural communities that support these workers" the U.S. Lumber Coalition says.

Russ Taylor, a Vancouver-based analyst, says that softwood duties imposed on Canada by the U.S. are expected to increase to about 30 per cent next August, and a 10 percent tariff from Trump on top of that would be "highly prohibitive" to B.C. producers.

"If you're an American company you're going OK, that's good for us, very good for us," Taylor said, even as it results in devastation for similarly rural communities in B.C.

No easy transition: analyst

He said Canada does have some allies in the United States, most notably the National Association of Homebuilders, which argues that duties and tariffs are negatively affectingthe cost of housing in the United States.

But while the group wants a new softwood deal negotiated, it also wants the United States to "reduce our nation's reliance on Canadian lumber imports" and turn to other countries to help make up the difference, something that could harm B.C. even without tariffs.

Taylor says while B.C. and Canada have at times tried to diversifylumber export markets to include Asia and Europe, It isstill highly reliant on the United States, and that is unlikely to change under current market trends.

Trying to use more wood in Canada, he said, would also be a problem because the Canadian market for lumber can only absorb about one-third of what the country currently produces.

"Our mills are designed for the United States," he said. "It's not an easy transition."