Use Timber Tariffs to Leverage Policy Changes
According to Fox News exit polling in the 2024 elections, 51 percent of the American electorate was “very concerned” with housing costs. Columnists spill oceans of ink bemoaning the difficulty young people face in buying into the American dream. From far left to far right, there is unanimous consensus that home prices are unacceptably unaffordable.
Dropping our tariffs on Canadian timber would meaningfully reduce construction costs, home insurance premiums, and alleviate shortages.
Yet, last August, the U.S. almost doubled tariffs on Canadian timber from 8.05 percent to 14.54 percent, increasing U.S. lumber costs. This is barking up the wrong tree if politicians’ stated desire to “make housing affordable” is sincere.
Swaths of America beset with hurricane and fire damage need rebuilding. Historically high home prices preventing family formation need reducing. The Trump administration yearns to reshape the U.S.-Canadian relationship to our benefit. These facts point to an inexorable conclusion: Trump should lift our ridiculous tariffs on Canadian timber, but force changes to Canadian foreign and economic policy as a precondition.
More affordable timber means cheaper housing, repair, and insurance, and more protection against foreign producers means higher domestic prices.
According to a breakdown on the very conservative Bankrate estimate of $200,000 to build a 2,000 square foot home, lumber costs average 8 percent of construction costs, or $16,000. Assuming that the 14.54 percent tariff imposed on Canadian lumber is effective (which is to say, it makes Canadian lumber at least as expensive as American products and allows U.S. producers to predominate), then these tariffs are adding $2,300 to the asking price of a $200,000 home, and presumably around $4,600 to the average existing home sold in the US, which now brings an eye-popping $406,100. Obviously, houses that are more expensive to build are also more expensive to rebuild.
As risk of loss and rebuild costs are the primary determinant of home insurance rates, lumber tariffs also mean higher home insurance premiums.
Natural disasters, such as the fall hurricanes in the Southeast or the recent California wildfires increase demand for lumber, lay bare the cost of policies that prevent importation to alleviate shortages. As Thomas Sowell once asked: if we blockade other nations during wars to weaken them economically, why would we do such to ourselves in peacetime?
Since the start of the year, lumber prices increased from $550 per thousand board feet to $594, a jump of 8 percent. Although lumber prices are still well below the crazy levels of the 2021-2022 COVID housing boom since which prices have fluctuated in a range between about $425 and $600, the wildfires have pushed prices to the top of that post-mania range.
Leveraging Tariffs
Dropping our tariffs on Canadian timber would meaningfully reduce construction costs, home insurance premiums, and alleviate shortages. However, the Trump administration should drop them as part of a comprehensive deal that addresses other immigration, energy, and foreign policy concerns rather than unilaterally.
Trump has repeatedly (and reasonably) called on all NATO nations to hit at least the 2 percent of GDP minimum defense spending, yet Canada spent just 1.38 percent in 2023, and planned to not hit 2 percent until “2030, at the earliest.” Meanwhile, Trump and the GOP have placed great emphasis on the necessity of additional immigration and drug interdiction assistance from the Canadians.
Between the carrots of enabling Canadian timber to compete in the U.S. without tariff hindrance and re-starting the Keystone XL pipeline to help Alberta tar sands producers get their oil to world markets (and in the process, reduce the world’s reliance on anti-Western regimes), getting Canadians to enact higher defense spending, lower barriers against U.S. exporters, distance itself from Chinese commercial influence, and assist at the border is commonsense. The fact that Canada is likely to have a conservative government after this fall’s election only helps the odds of such an agreement.
The Trump administration can lower home prices for American families, reduce home insurance rates, encourage family formation, increase energy security, and enhance U.S. national security all at the same time. Let us hope that the talk of “universal” 25 percent tariffs on all Canadian goods is meant to get Canada to the table for negotiations that get down quickly to the lick-log: help us lay the lumber to drug gangs, cross-border crime, and burgeoning Chinese commercial influence, and we will open up America as a bigger export market for Canadian natural resources, lowering crucial costs for our citizens.
READ MORE:
Trump’s Tariffs and the Administrative State
Tariffs: Preserving America’s Superpower Status
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