Lumber prices, I guess feeling left out of all the inflation talk, are once again rising above one thousand dollars, according to Ryan Dezember’s latest report over at The Wall Street Journal…(WSJ)
- “Futures for January delivery ended Friday at $1,089.10 per thousand board feet, twice the price for a prompt delivery in mid-November.”
- “Cash prices are way up as well. Pricing service Random Lengths said that its framing composite index, which tracks on-the-spot sales, has jumped 65% since October, to $915.”
So why are prices skyrocketing? Like everything else, supply chain disruptions are a problem and, like everything (if not more so), demand is up as well. Adding to the supply issues, flooding in British Columbia has cut off sawmills from forests and customers. All of this is leading to higher prices for wood.
However, unlike almost everything else, the lumber industry is dealing with another problem, tariffs. Lumber tariffs have been on the books since 2017 when the Trump administration put them on imports of Canadian lumber. However, at the end of November, the Biden administration decided to double them. Proving he’s not completely different from his predecessor…(CBC)
- “On Wednesday, the U.S. Department of Commerce said it will proceed to impose duties of 17.9 per cent, on average on softwood lumber imported from Canada. That’s twice the previous 8.99 per cent rate.”
- For those doing the math at home, if lumber is selling at $1,000 per thousand board you are paying an extra $180 per thousand board. For every 1,000 square feet, you need about 6,300 boards. Meaning an average 3,000 sq foot home will cost you an extra $3,500 because of lumber tariffs.
So how bad are lumber tariffs? There are not many issues that the Washington Post Editorial Board and the Heritage Foundation are going to agree on. However, ending lumber tariffs is one of them…
- The Washington Post Editorial Board wrote on December 2nd, “The lumber tariff mess is yet another reminder that the Biden team urgently needs to review tariffs across the board. The administration recently rolled back steel and aluminum tariffs on the European Union. It’s a good start. As Mr. Biden looks for more ways to reduce living costs for everyday Americans, lumber tariffs are an obvious place to take action before prices — literally — go through the roof.“
- The Heritage Foundation wrote on December 9th, “The Biden administration should roll back tariffs on softwood lumber from Canada as it has done with steel and aluminum. There are enough economic and trade troubles in the world today. The mutually beneficial Canada-U.S. relationship should not become one of them.”
Tariffs are almost never a good idea. Scott Lincicome famously coined the phrase back in 2018 that “Tariffs Not Only Impose Immense Economic Costs but Also Fail to Achieve Their Primary Policy Aims and Foster Political Dysfunction Along the Way.” He’s right. The original purpose of these tariffs was to hurt China. Almost 5 years later there is zero evidence they have done that. All we have done is make a few sawmill owners a little bit more money at the expense of U.S. consumers.
P.S. While sawmills have added about 6,000 jobs since 2017. However, an NAHB study in 2017 found these tariffs would cost the economy 8,000 jobs. For those keeping score at home, that would be a net negative.