Trump Slaps Anti Subsidy Duty on Canadian Softwood; can Canadian Dollar Slumps

The Canadian dollar slumped to the lowest point of the year on the news that Trump has slapped new tariffs on imports of lumber.

Canada’s lumber trade with the United States is worth $5 billion and Canada’s share in the US lumber market is about 31.5 percent. The proposed tariffs as unfair and punitive. The duties will bring $1bn to US exchequer.

The Canadian dollar dropped to a 4-month low against the U.S. dollar after Trump announced the tariff, falling as much as 0.6 percent to 73.6 U.S. cents.

In the latest chapter of a trade dispute that has been simmering for decades, the U.S. Department of Commerce in a preliminary determination Monday said it has calculated that Canada subsidizes Canfor Corp. by 20.26 percent; West Fraser Mills Ltd. by 24.12 percent; Tolko Marketing and Sales Ltd. and Tolko Industries Ltd. by 19.5 percent; Resolute FP Canada Ltd. by 12.82 percent and J.D. Irving Ltd. by 3.02 percent. It set a preliminary subsidy rate of 19.88 percent for all other producers in Canada.

A detente in the lumber trade dispute expired in October, and a new agreement isn’t on the horizon. That’s contributed to a more than 20 percent surge in wood prices since the U.S. election.

Since the early 1980s, the U.S. has argued with Canada over how much softwood lumber the country’s suppliers can sell in the U.S. and at what price. The two nations have negotiated temporary agreements in previous years over softwood, which comes from trees that have cones, like pine or spruce, and is preferred by builders for constructing home frames.

Most of the softwood in Canada is owned by provincial governments, which set prices to cut trees on their land, while in the U.S. it’s generally harvested from private property. The fees charged by Canadian governments are below market rates, creating an unfair advantage, U.S. producers say. Canada disputes that.