Area businessmen think the region will handle timber tariff

  • President Donald Trump’s proposed Canadian lumber tariff probably won’t affect New England Forest Products directly, but the move may hold consequences nonetheless. Staff photo by Brandon Latham

Monadnock Ledger-Transcript
Published: 5/2/2017 7:01:57 AM

Last week, President Donald Trump said he planned on issuing a tariff on lumber imported from Canada to the U.S. averaging about 20 percent.

On Monday, April 24, the Department of Commerce issued a preliminary decision to collect duties on softwood imported from a number of Canadian companies. Despite the volume of timber in the Monadnock Region, and the number of people employed locally in that industry, business leaders are not predicting a big shift in costs or supply.

“The softwood lumber market has been depressed for a long time, so in my estimation it’s more hype than it is consequence,” Jack Belletete, president of Belletetes Building Product Specialists, based in Jaffrey, and its subsidiaries Ashland Lumber and A&B Lumber and Barns, said.

At Belletetes, they are prepared to weather sudden market changes by holding about 60 days worth of back stock. Belletetes is among the region’s biggest individual employers.

“Nothing is going to change about my business plan as of now,” he said.

He said that the concept behind the tariff is to counter Canadian government market manipulation that helps Canadian companies.

“The idea here is that the Canadian government changes the price of stumpage based on the market,” he said. “They might have, if the market goes down, the stumpage price goes down.”

Stumpage is the rate a private company pays to a landowner for the right to harvest timber. In both the U.S. and Canada, a lot of this land is owned by the federal governments. The American government does not change the stumpage rate with the market like Canada’s does, and neither do private landowners.

Quoted in a statement issued on April 25, the day after the preliminary ruling, Commerce Secretary Wilbur Ross said, “the Department of Commerce determined a need to impose countervailing duties of roughly one billion dollars on Canadian softwood lumber exports to us. This is not our idea of a properly functioning Free Trade Agreement.”

They also said in a release that imports of softwood lumber from Canada were valued at an estimated $5.66 billion in 2016. The department will issue a final decision in September.

Among the concerns the plan has inspired is the imbalance it causes in the cost of trade between the U.S. and Canada. Not only do Americans buy a lot of Canadian lumber, but Canadians buy a lot of American lumber, which might now be threatened.

“Overall, its effect will really play into the exchange,” Katie Warner, controller at New England Forest Products in Greenfield. “When Canadians buy wood from the U.S., the exchange rate is not in their favor, but it evens out when the U.S. buys from Canada.”

New England Forest Products deals in hardwood, so Warner said the duty will not have a direct impact on business. The company uses all locally supplied logs and does participate in exporting, though.

Warner said the biggest pine mills in the state, which might see an impact directly, are Madison Lumber in Madison, and Durgin and Crowell in Springfield.

Belletete said the spruce and cedar stocks are the ones to keep an eye on. An increase of about 25 percent would make a regularly-priced section (eight feet) of 2x4 that is $2.80, would cost about $3.50, and may slide back according to Belletete.

He also said that this tariff is not a new issue, and it is something people in the industry have had in mind for about ten years, calling this his “second or third go-around.”

The last agreement on softwood trading was signed in 2006 and expired in 2015.

As real estate development is concerned, Belletete again underplayed the consequences of the tax. He said that the framing lumber and trim are responsible for about 25 percent of the value of a house. It would yield “maybe a ten percent real cost increase on average.”

For a $300,000 new house, a ten percent increase would make it $330,000.

The president is also challenging trade with Canada in the dairy and energy industries.

He tweeted on April 25, “Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!”


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