Canadian Softwood Lumber Tariff — what ever happened?
Big Red Car here on a drippy and rainy gray ATX day. It has been raining for almost a month.
Today, we talk about what really happened by the imposition of the Canadian Softwood Lumber 20.8% tariff back in May 2017.
Of course, the Canadians and the Americans – National Association of Home Builders – immediately began to cry foul predicting that the price of a US home would go up by $9000.
The business press said “Trump is an idiot. This will cause a huge trade war.”
Now, of course, we have some firm evidence as to what did happen. In fact, after hitting a peak of $653 per thousand board feet, the current price of lumber is $313.40/thousand board feet.
That’s right lumber has gone DOWN after the imposition of the tariff. Here is the price of a thousand board feet of lumber from the inception of the tariff until today.
We spoke about this issue back in early 2017 when it was happening in real time. Here is what we said.
Wait, Big Red Car, what happened?
Yes, dear reader, the price of a thousand board feet of lumber was approximately $380 when the tariff was imposed back in May of 2017.
Then, it rose to $653 per thousand board feet. Peak price.
Now, it has dropped to $313.40 per thousand board feet.
How is that possible, Big Red Car?
Well, first, US production has increased once Canadian dumping of lumber was curtailed by the higher price created by the imposition of the tariff.
What this means is more American jobs. More American paychecks. More American taxes to be collected.
With the increase in production, the cost to produce a thousand board feet of lumber went down.
As the supply went up, the price went down.
But, but, but, Big Red Car?
Yes, dear reader, the naysayers and the #NeverTrump brethren said this was going to create a trade war. The Canadians were going to retaliate.
Trump is an idiot. Wilbur Ross is deranged.
The National Association of Home Builders said the price of a home would go up $9,000.
Everybody was all upset.
What did happen, Big Red Car?
The Trump admin and policy was right.
The Canadians were subsidizing the price of their lumber.
Upon imposition of the tariff, US production increased driving the actual prices down.
American jobs were created in the process. American paychecks were increased.
More revenue was realized by the US Treasury from more jobs and American production.
TRUMP WAS RIGHT.
It just took a little time for the forces to come into equilibrium. And, then, they did. Well played, American economy. Well played, President Trump.