Analysis by Kyle A. Lohmeier
If, theoretically, something as small as the flap of a butterfly’s wings in Brazil can contribute to something as large as a tornado in Texas, then it stands to reason that something as large as Trump’s newly-imposed tariffs on Canadian lumber will have similarly huge and unintended effects on different parts of the economy and to individual people. Already, the National Association of Home Builders already has grim news for Americans.
“’For builders, it’ll increase the cost of construction by about $3,000 on the average home, which unfortunately will be passed on to consumers,’ said Jerry Howard, CEO of the group,” CNN Money reported late yesterday.
Of course, in theory, American consumers could avoid that additional cost by simply using American-grown and sawn lumber products, right?
“’They rely on imports,’ said Steve Rustja, a vice president at Canadian lumber company Weston Forest. ‘Who is going to end up paying for it? Ultimately it’ll be the U.S. consumer,’” CNN Money reported.
The tariffs target five Canadian companies specifically and ranged from three to 24 percent. All other Canadian lumber companies will face a 20 percent tariff on exports to the U.S.
Of course, protectionism tends to be popular among the industries protected by it, so, not all the commentary on the imposing of the tariffs has been negative so far.
“’The duties are an essential step to make sure we don’t lose more jobs,’ said Zoltan van Heyningen, executive director of the U.S. Lumber Association.
He also argues that the tariffs won’t boost home prices by nearly as much as builders say it will. He points out that the average cost of building a new home is $225,000, and that $3,000 is a fairly small proportion of that.
‘The impact [of duties] on consumers’ ability to buy homes is miniscule to non-existent,’ said van Heyningen. ‘We have 360,000 [lumber] jobs dependent on a level playing field with Canada,’” CNN reported.
Meanwhile, CNN Money reported that builders argue the higher lumber prices could put the brakes on the already slow-to-recover U.S. housing market, which could ultimately cost 8,000 jobs and $500 million in lost wages.
The impetus for the tariffs comes from the contention that Canadian lumber companies receive unfair government subsidies and that the trees they cut tend to grow exclusively on land owned by the Canadian government, which also helps keep costs down. The U.S. has been accusing Canada of subsidizing its lumber producers for decades and has previously put temporary tariffs on lumber imports. In 2004, the World Trade Organization sided with Canada and a deal was brokered in 2006, which expired this past October.
Trump’s motivation for harming the struggling housing industry comes partially from the failure of his efforts to help America’s dairy industry by trying to convince Canada to drop its own massive tariffs on U.S. dairy product imports – some products facing duties as high as 292 percent – but no breakthrough came in those talks.
Ironically, one of the more clever quotes out of this whole mess came from the spokesman of one of the companies targeted by the lumber tariffs.
“’Managed trade only serves to benefit large timber barons in the U.S. while adversely impacting U.S. consumers and millions of hard-working Americans in the housing sector,’ a spokesperson for Resolute said in a statement,” CNN Money reported.
True, managed trade only ever benefits the firms intended to benefit from it, but no part of the economy operates in a vacuum. The government cannot pay Paul without first robbing Peter; the government cannot benefit the lumber industry without hurting other industries, and all consumers, in the process. Government cannot ever make anything better for consumers. Every regulatory action they take drives up cost and drives down choice and competition. Every protective action they take on trade has a similar effect – prices go up, choices go down.
Of course, protectionism and tariffs cannot exist without government; a nation can only have “unfair trade practices” if it has established borders and a government to regulate the trade that crosses them. If people and companies were free to do and trade as they please, none of this would be necessary and consumers on both sides of the border would have more options available at lower prices. If there was no government, there wouldn’t even be a border to bicker over and companies couldn’t try to use government to gain an unfair advantage over their competitors and would instead have to survive or fail on their own merits.
But, when those companies can enlist the aid of an organization with a local monopoly on the initiation of violence to force their competitor’s prices upward, they tend to do just that. Why wouldn’t they? As always, government is a loaded gun sitting on a table while a variety of interest groups scramble over one another, fighting to be the one who gets to use it to hurt their “enemies.” Today, big lumber got to pick it up and pump some rounds into their Canadian rivals – that American consumers got hit by ricochets and pass-throughs is just an inescapable consequence of having government to begin with.
Leave a Reply