Globe and Mail reporter Barrie McKenna.The Globe and Mail
It is easy to figure out how U.S. tariffs on Canadian lumber will affect Americans.
It's going to make U.S. homes, renovations and furniture more expensive. Even before Monday's move by the Trump administration to hit Canada with a preliminary 20-per-cent duty, the price of lumber was rising in anticipation of the looming dispute. Lumber is up 22 per cent since January, adding roughly $3,600 (U.S.) to the price of a typical new home, according to the U.S. National Association of Home Builders.
A sustained price hike of this magnitude will put the dream of home ownership out of reach for nearly half a million Americans.
The United States can't just produce more lumber. The country has traditionally relied on imports for roughly a third of its lumber needs – and virtually all of it comes from Canada. The math is pretty simple: Tax Canadian lumber, or restrict imports though a quota, and the price of lumber goes up.
Unfortunately, none of this matters. If this dispute was about the cost of a home, Canada would not be facing its fifth lumber trade war since the 1980s.
Canadian officials love to trot out U.S. home builder statistics to demonstrate how Americans are actually hurting themselves when they put a tariff on Canadian lumber.
"This decision will negatively affect workers on both sides of the border and will ultimately increase costs for American families who want to build or renovate homes," Natural Resources Minister Jim Carr and Foreign Affairs Minister Chrystia Freeland said in a statement Monday.
These arguments did not win the day in the early 2000s or in any of the earlier showdowns. And they are unlikely to work this time.
Here's why: The average price of a newly built U.S. home was $388,000 in March. Lumber adds less than $10,000 to the final price. That pales compared to the contribution of land, labour and interest rates to the final price. Lumber is little more than a rounding error in this calculation.
Nor is this a dispute fundamentally about saving U.S. logging and sawmilling jobs – although U.S. President Donald Trump will insist it is. Mr. Trump can "Buy American, Hire American" all he wants, but it won't create more jobs in the highly automated logging and sawmilling business, and it could costs tens of thousands of U.S. home-building jobs.
The essence of this fight is about the market value of trees. Nearly three-quarters of U.S. forest land is in private hands in the United States. In Canada, just 10 per cent is, with the rest owned by governments.
There are more than 10 million small woodlot owners in the United States. A much smaller clutch of a few thousand very large forest owners are the driving force behind the U.S. Lumber Coalition, which launched this and earlier trade cases.
They have one motivation: increase the value of timber, which has become a phenomenal store of value in a world of slim investment yields.
Taxing Canadian lumber is an easy way to make that happen. Win or lose a trade case and it still pushes up the price of lumber, and more importantly, stumpage rates.
The economics made another trade case against Canada inevitable, in spite of previous lost rounds of litigation. The final duties applied on Canadian lumber are likely to be in the ballpark of the combined 27-per-cent anti-dumping and countervailing duty applied in the early 2000s.
Nothing has really changed in the intervening years. Canadian provinces still set the price of most harvestable trees. If anything, Canadian stumpage rates are more reflective of market prices than before and that should reduce the level of alleged subsidies.
What hasn't changed is that litigation is a relatively cheap way to push up the value of U.S. lumber, trees and land.
For the U.S. industry, a loss hardly matters because lumber prices stay artificially high while the case plods along.
And if the U.S. Lumber Coalition is really lucky, Canada will eventually cave and agree to cap its exports. That also does the trick because squeezing supply inflates the value of U.S. trees, transferring wealth from U.S. consumers and Canadians to U.S. woodlot owners.
Tails I win. Heads you lose.
Want to interact with other informed Canadians and Globe journalists? Join our exclusive Globe and Mail subscribers Facebook group