Author Topic: Trump’s New Housing Tax: A tariff on Canadian lumber will raise the cost of U.S. homes.  (Read 4767 times)

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Offline SirLinksALot

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SOURCE: WALL STREET JOURNAL

URL: https://www.wsj.com/articles/trumps-new-housing-tax-1493159499



Commerce Secretary Wilbur Ross announced Monday that the Trump Administration will raise the cost of new single family homes in the U.S. as part of its promise to “make America great again.”

Mr. Ross didn’t put it quite that way. He said the Administration will impose a 20% tariff on softwood lumber imports from Canada, a country they accuse of subsidizing their lumber industry, which total about $5 billion at year. But that’s a lot of lumber and the tariff will add an additional $1 billion in new costs for U.S. construction. Most of those costs will be added to the price of new American housing, not counting the higher costs that will come as U.S. producers raise their prices to match the competition and pad their bottom lines.

... [SNIP]

Yet while the cross-border haggling drags on, middle America is where the new lumber tariff will hit hardest. According to the National Association of Home Builders, 28% of U.S. softwood lumber purchases are Canadian imports and these are particularly important in the construction of single-family homes. Roughly 7% of the cost of an American home is the lumber and that cost is already up, on average, by some $3,000 this year. The Journal reports that “builders say lumber costs are already at the highest in a decade.” Labor shortages in construction, thanks in part to restrictions on immigration, are also pushing up costs.

With his announcement last week on steel and this week’s lumber action, Mr. Trump’s trade policy is coming into focus. He’ll use tariffs to restrict imports and appease domestic producers that have the best trade lawyers and lobbyists, while hoping consumers don’t notice the higher prices. Mr. Trump made it to the White House with the support of middle-class voters still yearning for the American dream.

(Excerpt) Read more at the above link
« Last Edit: April 26, 2017, 02:38:08 pm by SirLinksALot »

Offline mirraflake

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WSJ is pro globalisation so I would like to read a competing view before making up my mind.

Offline Sanguine

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Yes, that's what tariffs do.

Offline mirraflake

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Yes, that's what tariffs do.

If Canada is wiping out our own wood industry by subsidizing theirs something needs to be done. I believe GWB did the tariff against Canada back in 2003 for 30%.

@Sanguine

Offline Sanguine

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If Canada is wiping out our own wood industry by subsidizing theirs something needs to be done. I believe GWB did the tariff against Canada back in 2003 for 30%.

@Sanguine

I'm not saying the net effect will be good or bad; I don't know.  Just commenting on what tariffs do.

Offline Frank Cannon

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If we are going to trade with Socialist countries and not enforce agreements, then we may as well just shut down all of our manufacturing because we will not be able to compete with either their artificially low employment costs or material costs.

Offline skeeter

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WSJ is pro globalisation so I would like to read a competing view before making up my mind.

I'm not so sure its as cut and dried as the WSJ would like us to believe, since their interest is in corporate profitability and not so much what benefits the consumer.

I've long suspected material costs have very little to do with the sticker price of housing, at least where I live. Prices are set by what the market will bear, and those have long been much higher than the cost of wood, and even labor, for that matter.

Interestingly, at the same time the Canadian wood industry has been providing us all of this subsidized product the retail price of wood has been climbing at an increasing rate.
« Last Edit: April 26, 2017, 02:36:25 pm by skeeter »

Offline mirraflake

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I've long suspected material costs have very little to do with the sticker price of housing, at least where I live. Prices are set by what the market will bear, and those have long been much higher than the cost of wood, and even labor, for that matter.


Houses are also being built with less wood every year. Lot's  plastic products, fake plastic deck board. Fancy front entrance doors made out of molded colorized plastic that you cannot tell is wood.

@skeeter
« Last Edit: April 26, 2017, 02:42:12 pm by mirraflake »

Offline skeeter

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Houses are also being built with less wood every year. Lot's  plastic products, fake plastic deck board. Fancy front entrance doors made out of molded colorized plastic that you cannot tell is wood.

@skeeter

And fewer large pieces of virgin wood in favor of Glulam, which is manufactured from two and three year old trees, & OSB, etc. Recycled stuff.
« Last Edit: April 26, 2017, 02:45:05 pm by skeeter »

Offline mirraflake

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Usually what the WSJ recommends is usually bad for the American people.

Offline mirraflake

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And fewer large pieces of virgin wood in favor of Glulam, which is manufactured from two and three year old trees, & OSB, etc. Recycled stuff.

Lot of new home construction is metal studs. Not widespread yet but catching on.

BTW we are framing in a room  and I went to Lowes for 2x4's.  Out of every 10 or so I would find one decent one. Years back I remodeled the first house I owned that was built  in the 60's. The studs were near flawless. Ones today half the edges are gone.

@skeeter

Offline Cripplecreek

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Yes, that's what tariffs do.

At least Chuck Schumer has finally found common ground with Trump.

Offline skeeter

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Lot of new home construction is metal studs. Not widespread yet but catching on.

BTW we are framing in a room  and I went to Lowes for 2x4's.  Out of every 10 or so I would find one decent one. Years back I remodeled the first house I owned that was built  in the 60's. The studs were near flawless. Ones today half the edges are gone.

@skeeter

I'm glad metal studs haven't caught on in my area. Hate working around em.

I've noticed wood quality dropping, as well. Even in the lumber yards, where I went after becoming disgusted with the more affordable stuff at Home Depot.

BTW I'm working on a 1927 Bungalow and am absolutely amazed not only with the quality of materials, but quality of construction back then. Those guys were artists. Today's builders are hackers by comparison.

Offline endicom

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I've long suspected material costs have very little to do with the sticker price of housing, at least where I live. Prices are set by what the market will bear, and those have long been much higher than the cost of wood, and even labor, for that matter.


Location, location, location. You can afford that $10,000,000 Malibu home if it happens to be in rural Nebraska.

Offline endicom

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And fewer large pieces of virgin wood in favor of Glulam, which is manufactured from two and three year old trees, & OSB, etc. Recycled stuff.


I was shown blocks of compressed and 'compregnated' wood back in 1959. I think that plasticized wood would have become the norm if not for government regulations that happen to benefit certain industries or unions.

Offline truth_seeker

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A very longstanding trade dispute, predating Trump by a mere 35 years....

Per wiki:

"The Canada–U.S. softwood lumber dispute is one of the largest and most enduring trade disputes between both nations.[1] This conflict arose in 1982 and its effects are still seen today. British Columbia, the major Canadian exporter of softwood lumber to the United States, was most affected, reporting losses of 9,494 direct and indirect jobs between 2004 and 2009.[2]

The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments, as most timber in Canada is owned by the provincial governments. The prices charged to harvest the timber (stumpage fee) are set administratively, rather than through the competitive marketplace, the norm in the United States. In the United States, softwood lumber lots are privately owned, and the owners form an effective political lobby. The United States claims that the Canadian arrangement constitutes an unfair subsidy, and is thus subject to U.S. trade remedy laws, where foreign trade benefiting from subsidies can be subject to a countervailing duty tariff, to offset the subsidy and bring the price of the commodity back up to market rates.

The Canadian government and lumber industry dispute this assertion, based on a number of factors, including that Canadian timber is provided to such a wide range of industries, and that lack of specificity makes it ineligible to be considered a subsidy under U.S. law. Under U.S. trade remedy law, a countervailable subsidy must be specific to a particular industry. This requirement precludes imposition of countervailing duties on government programs, such as roads, that are meant to benefit a broad array of interests. Since 1982, there have been four major iterations of the dispute."

https://en.wikipedia.org/wiki/Canada%E2%80%93United_States_softwood_lumber_dispute

« Last Edit: April 26, 2017, 03:28:10 pm by truth_seeker »
"God must love the common man, he made so many of them.�  Abe Lincoln

Offline Sanguine

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A very longstanding trade dispute, predating Trump by a mere 35 years....

Per wiki:

"The Canada–U.S. softwood lumber dispute is one of the largest and most enduring trade disputes between both nations.[1] This conflict arose in 1982 and its effects are still seen today. British Columbia, the major Canadian exporter of softwood lumber to the United States, was most affected, reporting losses of 9,494 direct and indirect jobs between 2004 and 2009.[2]

The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments, as most timber in Canada is owned by the provincial governments. The prices charged to harvest the timber (stumpage fee) are set administratively, rather than through the competitive marketplace, the norm in the United States. In the United States, softwood lumber lots are privately owned, and the owners form an effective political lobby. The United States claims that the Canadian arrangement constitutes an unfair subsidy, and is thus subject to U.S. trade remedy laws, where foreign trade benefiting from subsidies can be subject to a countervailing duty tariff, to offset the subsidy and bring the price of the commodity back up to market rates.

The Canadian government and lumber industry dispute this assertion, based on a number of factors, including that Canadian timber is provided to such a wide range of industries, and that lack of specificity makes it ineligible to be considered a subsidy under U.S. law. Under U.S. trade remedy law, a countervailable subsidy must be specific to a particular industry. This requirement precludes imposition of countervailing duties on government programs, such as roads, that are meant to benefit a broad array of interests. Since 1982, there have been four major iterations of the dispute."

https://en.wikipedia.org/wiki/Canada%E2%80%93United_States_softwood_lumber_dispute

That's the way I understand it.

But, keep in mind that whenever you add costs to a commodity, someone has to pay those extra costs.  And, guess who that "someone" is?

Offline Idaho_Cowboy

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We could use our own trees instead of letting them burn every summer.
“The way I see it, every time a man gets up in the morning he starts his life over. Sure, the bills are there to pay, and the job is there to do, but you don't have to stay in a pattern. You can always start over, saddle a fresh horse and take another trail.” ― Louis L'Amour

Offline truth_seeker

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That's the way I understand it.

But, keep in mind that whenever you add costs to a commodity, someone has to pay those extra costs.  And, guess who that "someone" is?

However a) Canada can reduce the prices, or b) Different suppliers (instead of Canada) can be utilized, Sweden, Finland, Russia, etc. c) Purchase more from US suppliers instead.

It would not be the first example of shifting suppliers.

"God must love the common man, he made so many of them.�  Abe Lincoln

Offline mirraflake

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BTW I'm working on a 1927 Bungalow and am absolutely amazed not only with the quality of materials, but quality of construction back then. Those guys were artists. Today's builders are hackers by comparison.

My parents first house house was built in 1948. The base floor was  thick hardwood, tongue and groove machine  planed boards about 6" wide or so and they were installed diagonally and they then installed 1" stained hardwood floors over that. You jump up and down on the floor and it was like jumping on concrete.

We are in the process of selling the house I built in 1994. I tried to use the best materials at the time and took great care of it. Have a crew doing tile work etc Replacing all the doors because the bottoms door frames are all rotted out and I painted the frames every 2-3 years.

The guy who is doing all the work said the homes built in the 80's on up  will last about 50-60 years. and then be torn down..disposable.
@skeeter

Offline truth_seeker

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Oh yeah. Who was President in 1982, when this conflict first arose?

Clue: Not Trump.

"God must love the common man, he made so many of them.�  Abe Lincoln

Offline endicom

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The guy who is doing all the work said the homes built in the 80's on up  will last about 50-60 years. and then be torn down..disposable.


Maybe, but the same was said of the homes built during the booms of the 1950s and 1960s.

geronl

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The US lost a case against Mexico and will lose this one too

Offline skeeter

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Maybe, but the same was said of the homes built during the booms of the 1950s and 1960s.

My folks track home, built in '58, is holding up pretty well, with minimum of maintenance. But of course in California weather.

geronl

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Oh yeah. Who was President in 1982, when this conflict first arose?

Clue: Not Trump.

Wilbur Ross is working for who? This is a present-tense story, it's not about 1982