Canada may have an advantage in a potential trade war with the US over lumber exports, according to Jens Peter Barynin, chief economist at Vivi Economics. The country’s lumber assets could be used as leverage to counter US import tariffs, potentially by implementing export taxes on lumber.
Canada produces about 25% of the US demand for lumber, but US President Donald Trump claims the country doesn’t need anything Canada produces. However, Barynin notes that the US has limited milling capacity and cannot meet its domestic demand without accessing state-owned forests in Washington, Oregon, and Idaho. Implementing such access would likely face fierce resistance from environmental groups.
Despite these challenges, Barynin believes Canadian policymakers should feel confident that even a significant increase in lumber prices would still be attractive to the US market. During the pandemic, lumber prices rose by 400% but demand remained strong for housing construction. He argues that free trade agreements are mutually beneficial and bring more losers than winners on both sides.
In reality, Barynin says a trade war is not about finding winners or losers, but rather about making trade pain as bad as possible for the other country. Canada has already benefited from its free trade deal with the US and should continue to push back against any attempts to upset it.
Source: https://www.ctvnews.ca/world/trumps-tariffs/article/how-canada-could-use-lumber-as-a-winning-weapon-in-a-us-trade-war