15% Tariff on Canadian Lumber Would Cost 4,666 U.S. Jobs

Recent NAHB estimates show that a 15% tariff on softwood lumber imported from Canada would have resulted in a loss of

Bullets1had it been applied to all Canadian producers in 2014.  NAHB analyzed 15%, because that was the maximum tariff in the Softwood Lumber Agreement that expired last year.  NAHB analyzed 2014, because that was a recent year with complete data, seemed representative in the sense that available data for adjacent years were similar, and was a year in which a tariff was not generally in effect, allowing us to illustrate the differences in a market with and without the tariff.

The 2014 data show that the U.S. produced 32.0 billion board feet of softwood lumber, exported 1.6 billion board feet of it, imported 12.1 billion board feet from Canada, and 0.4 billion from other countries during the year.  A board foot is a measure of volume equivalent to a 12-inch square, one-inch thick board, and is the standard measure used to quantify and price lumber.

NAHB then used average estimates of market responsiveness to price taken from a 2011 technical article by Baek to show that a 15% tariff in 2014 would have resulted in a

Bullets2Home builders are among the major U.S. customers of softwood lumber.  Using information from the Annual Builder Practices Survey conducted by Home Innovation Research Labs, NAHB has been able to estimate the amount of softwood lumber in an average single-family and average multifamily home.  The estimates show that, at mid-2014 prices (supplied by Random Lengths), a builder would pay $15,413 for the softwood lumber in an average single-family home and $5,354 for the softwood lumber in an average multifamily home.

The 4.2% increase in prices paid by builders as a result of the tariff translates to an annual impact on the U.S. home building market that (assuming a conventional price elasticity for housing demand of -1) includes aBullets3Even allowing for some increased output by U.S. lumber producers, NAHB’s National Impact of Home Building Model shows that the impact of the reduced investment in housing is substantial (bullet points in the first paragraph).  The following table breaks down the net annual impact of the tariff by major industry group and type of tax (or other government) revenue lost.

Tariff 15pct

The jobs are measured in full-time equivalents (i.e. enough work to keep one person employed full time for a year, based on average hours worked by full-time employees in a particular industry).

The estimates shown above cover only the impacts of increased output by U.S. sawmills and reduced investment in new residential construction.  They do not include any upstream impacts on inputs used by U.S. sawmills, such as domestically produced timber; nor do they include negative impacts of higher prices paid by other lumber users in the U.S., such as residential remodelers.

For interested viewers, background information on the Softwood Lumber Agreement is available on the Office of the U.S. Trade Representative web page.

 



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