FORTUNE: How Trump’s Tariff Against Canada Could Lead To A Trade War




April 27 | By: Alan Wolff.  

Earlier this week, the Trump administration announced a preliminary decision to impose a 20% tariff on Canadian softwood lumber imports. The move stems from an ongoing trade issue that dates back at least to the Reagan administration, which is poised to hurt both the US and Canadian economies if the countries can’t resolve it.

Lumber mills in Canada and the U.S. essentially have different ways of buying timber. In Canada, timber comes mostly from trees grown on government-owned lands, while U.S. lumber mills mostly buy their timber from private landowners through competitive bidding. At issue is that the US views Canada’s practice as a subsidy to its lumber industry giving it a competitive advantage over U.S. producers. And since Canada also restricts its log exports, this depresses Canadian timber prices even lower, increasing the advantage Canadian lumber has in the U.S. market.

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