The Canadian Softwood Lumber Tariffs’ Impact on Construction

The Softwood Lumber Agreement between the U.S. and Canada expired back in October 2015.  For several months, there has been speculation as to what the Trump administration would do with its renewal.  On April 24th, 2017 it was announced that a 20% import tax would be placed on Canadian softwood lumber.  More than one-third of the U.S. lumber supplies come from Canada.  What will this mean for labor and skilled labor jobs?

Two Sides, Two Opinions

The National Association of Home Builders called the 20% import tax “short-sighted.”  The new tariff will affect housing affordability.  The NAHB stated that “a $1000 cost increase can eliminate 150,000 potential buyers from qualifying for a mortgage.”  Furthermore, this tariff could cost 8,000 full-time jobs in construction.  With the busy season now upon us this bad news for construction staffing.

However, lumber producers are saying differently.  Executive director of U.S. Lumber Coalition, Zoltan van Heyningen, “called the NAHB’s estimates about jobs and wages baseless, said builders are only concerned about their own profits, and noted the association cannot indicate how the tariffs will impact home sales or housing starts.”

While refuting the NAHB’s assertions, Heyningen does not offer countering numbers in regard to labor jobs.  He simply says the NAHB is wrong and that jobs will not be effected by the 20% tariff.  At the end of his opinion article for The Hill it becomes a bit clearer he is referring to jobs in the U.S. forestry industry, but does not consider the jobs of the laborers building the homes that have become a bit costlier.

Lumber for construction
Lumber for construction

Labor and Side Effects

No matter who is right, the NAHB or the U.S. Lumber Coalition, when prices are raised by any amount, the first to feel the effect are those at the bottom of the totem pole.  The laborers and skilled laborers doing the work of building homes in the U.S. will be the first place companies will seek to make up for the 20% tariff if it effects building costs.  It will be the laborers or the home buyers, time will tell on that one.

There is another side effect of the 20% tariff.  The price of softwood lumber has already increased 29% since the start of the year.  According to investing.com the price of lumber is about $380.00 in May 2017.  That is up from $330.00 in January 2017.  Going back just a bit further, May 2016 saw a price of $303.40, up from January 2016 at $240.40.  Lumber prices overall have increased 20% since January 2017 and a total of nearly 50% since January 2016.  Lumber prices have been on a steep climb and now add to that the 20% tariff on softwood lumber.

Every source you read you’ll see that this was all expected to happen.  So, there is certainly no going back.  Within this year, we will see just what effect this softwood lumber tariff will have on labor and skilled labor jobs in construction.  As a reminder, there is a skilled labor shortage, what kind of effect will this have on it?  Several analysts claim the costs will be covered by home buyers and the builders will not be affected.  We’ll wait and see.

Original sources: ConstructionDive, HousingWire, The Hill, investing.com