In collaboration with Anthony Kim*
House prices are 20% higher than they were a year ago due to lingering supply chain issues, increased cost of materials and labor shortages. With housing affordability threatened, American home builders are asking the Biden administration to temporarily lift tariffs on building materials such as steel and lumber from China and Canada.
Duties on Canadian softwood lumber have gone on quite a ride in recent years, rising to 20.2% in 2017 and then settling down to 8.9% last year. However, this May, the U.S. Commerce Department announced it was taking steps to boost tariffs on Canadian softwood lumber imports once again. In late November, the Commerce Department reported that the average tariff will double, back up to 17.9%.
These tariffs act as a tax on consumers and exacerbate price volatility. Lumber prices skyrocketed this past year, adding almost $36,000 to the cost of a new single-family home. Factor in ongoing supply chain issues, and it’s no surprise homebuilding has slowed. The gap between houses under construction and completed houses was the largest on record in September.
Ultimately, these duties benefit only American lumber producers, who seek to protect their market share. For decades, they have accused Canadian producers of “dumping” their lower-priced lumber in the U.S., and every time, international trade arbiters have cleared Canadian lumber producers of the charge. Moreover, the U.S. International Trade Commission has found that Canadian lumber imports are not a threat to the American industry, so there’s no justification for slapping duties on them.
American lobbyists are good at getting what they want, but tariffs are a lousy way to treat any trading partner, much less a close friend and ally. They do no favors for this country either. Jacking up duties on Canadian lumber will result in thousands of job losses on both sides of the border, whether it’s American home builders or Canadian sawmill workers. These individuals should not be put out of work just to line the pockets of U.S. lumber producers — especially now when both economies are grappling with the economic fallout from the coronavirus pandemic.
When thinking of home builders, it’s easy to picture large developers. Still, most National Association of Home Builders members start 10 or fewer homes per year, and about half of them have five or fewer employees. In other words, it’s mostly small employers, not faceless corporations, that are suffering. And with governments tending to impose tariffs on materials that go into life’s necessities, like food, clothing and shelter, it’s everyday consumers who are hurt the most.
It’s no surprise, then, that countries with fewer trade restrictions are more prosperous than those that restrict trade. According to the Heritage Foundation’s latest annual Index of Economic Freedom, the United States isn’t even in the top 10 freest economies in the world. In fact, at number 20, there’s a lot of room for improvement if the Biden administration is looking for something useful to do.
Michel Kelly-Gagnon is President and CEO of the MEI and Anthony Kim is a Research Fellow at the Heritage Foundation. The views reflected in this opinion piece are their own.