A truck is loaded with a shipment of softwood lumber at Groupe Crete, a sawmill in Mont-Blanc, Que., on Jan. 20.Christinne Muschi/The Canadian Press
Canadian producers of softwood lumber are bracing for a decision this week from the U.S. Department of Commerce that could mean a surge in anti-dumping duty rates, compounding the industry’s worries over President Donald Trump’s threats for sweeping tariffs on all imports from Canada.
Most Canadian producers are currently paying 7.66 per cent in anti-dumping duties levied against lumber shipments from Canada into the United States, but that could jump to 20 per cent, trade experts say.
The Commerce Department’s decision, slated for Thursday, will be preliminary – subject to further revisions before a final anti-dumping rate is determined, with an effective date in August.
There are two types of punitive measures in the Canada-U.S. trade dispute. Anti-dumping duties are imposed because of what the Americans describe as Canadian producers selling softwood below market value; countervailing duties are based on what the U.S. sees as subsidized Canadian lumber.
Analysts are predicting that there will be higher countervailing duty rates, with the Commerce Department scheduled to issue a preliminary ruling in May.
Vancouver-based forestry analyst Russ Taylor forecast that countervailing duties for most Canadian producers could rise to about 10 per cent later this year, compared with the current 6.74 per cent.
Most Canadian softwood producers are paying countervailing and anti-dumping duties that currently total 14.4 per cent.
Another punitive measure would stem from Mr. Trump’s plans to slap 25-per-cent tariffs on all goods that the U.S. imports from Canada and Mexico, starting in early March – to be stacked on top of existing lumber duties.
Mr. Taylor said that after layering the threatened tariffs on top of combined softwood duties anticipated to hit 30 per cent, Canadian lumber shipments south of the border could face hefty levies totalling 55 per cent by November.
The Canada-U.S. softwood dispute dates back to the early 1980s, complicated by divergent views on mostly public ownership of Canadian forests versus primarily private U.S. timberland.
“This issue has been going on longer than I’ve been alive,” Ravi Parmar, the 30-year-old B.C. Forests Minister, said during a news conference on Friday from Sacramento, Calif.
B.C. lumber will play a major role in helping California to rebuild homes after the devastating wildfires last month in Los Angeles, but trade tensions are intensifying, he said.
“We are predicting with a Trump tariff and increased duties, we could be dealing with a 50- to 55-per-cent tariff and duty on softwood lumber leaving British Columbia,” Mr. Parmar said.
Vancouver-based West Fraser Timber Co. Ltd., Canada’s largest lumber producer, is currently paying an anti-dumping duty rate of 5.04 per cent.
The country’s second-largest producer, Vancouver-based Canfor Corp., has an anti-dumping levy of 10.44 per cent.
Two forestry-sector sources said Canfor’s specific anti-dumping duty rate is at risk of soaring to 35 per cent, while West Fraser’s levy could climb to 9 per cent, depending on how the Commerce Department does its preliminary calculations.
The Globe and Mail is not identifying the sources because they were not authorized to speak publicly on the matter.
The Commerce Department’s administrative review is based on softwood markets in 2023, when prices were low. In their complex examinations, U.S. investigators look at a variety of factors such as sales data and costs of lumber shipments.
Amid timber constraints in Canada, especially in British Columbia, Canadian sawmills have seen their market share of U.S. lumber consumption steadily eroded to an estimated 24 per cent, compared with nearly 33 per cent in 2016.
The 2006 Canada-U.S. softwood agreement expired in 2015, with no replacement. In the latest round of the long-running trade fight, the Commerce Department started imposing duties in 2017 on shipments of Canadian lumber.
Over the past dozen years, Canadian-based companies have increased their presence in U.S. forests and gained the side benefit of lumber production at their American operations being exempted from duties.
Producers with Canadian head offices that have U.S. operations include West Fraser, Canfor, Interfor Corp., Western Forest Products Inc., Tolko Industries Ltd. and J.D. Irving Ltd.
But there will be a limited ability by U.S. sawmills to boost output because of supply chain challenges, Mr. Taylor said. “You can’t really add significant production levels in the U.S. or even in Canada. You just don’t have the work force or the loggers or you don’t have the logging trucks,” he said.
On Wednesday, the influential U.S. Lumber Coalition reiterated its argument that Canadian companies are unfairly dumping softwood.
“Unfortunately, even with the enforcement of the U.S. trade laws, Canada continues to engage in massive dumping of their excess lumber production into the U.S. market in an attempt to desperately hold on to their market share at the expense of American workers and their families,” coalition executive director Zoltan van Heyningen said in a statement.
The BC Lumber Trade Council, however, maintains that U.S. softwood duties and general tariffs are unjustified.
“These barriers will disrupt trade, raise costs for consumers and threaten jobs and communities on both sides of the border,” council president Kurt Niquidet said in a statement this month.
Canadian companies have been paying U.S. lumber duties for the past eight years. The 25-per-cent tariffs would be paid by mostly U.S. importers, though forestry experts anticipate a trickle-down effect to the retail level.
“A vastly large portion of the duties will ultimately be borne by the U.S. consumer,” Jens-Peter Barynin, chief economist at Vivi Economics, said in an interview.
Canadian producers could redirect only a small portion of their lumber exports to Asia that would normally head into the U.S., Mr. Barynin added.
U.S. producers say that under their system, the cost of timber rights on private land is more expensive than the Canadian stumpage fees paid by forestry companies to cut trees down on provincially owned property.
The Commerce Department has ruled in the past that provincial stumpage fees paid by Canadian softwood companies are too low and amount to subsidies.
“The lumber market remains fragile,” Scotia Capital analyst Ben Isaacson said in a research note this week.