U.S. Ramps Up Lumber Trade Spat With Canada -- Update

By Jacob M. Schlesinger in Washington and Paul Vieira in Ottawa Features Dow Jones Newswires

The Trump administration escalated its lumber trade tiff with Canada, adding a new layer of duties on imports from its northern neighbor, even as it said it still hopes to negotiate a settlement before the full bite of the penalties is felt.

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Two months after moving to impose 20% tariffs on Canadian softwood lumber commonly used in single-family homes, the Commerce Department announced Monday that it was considering additional fees that would mean some products would face duties as high as 30.88%.

The Trump administration has accused Canada of unfairly selling its lumber in the U.S. below production costs, aided in part by improper government subsidies -- a trade practice known as "dumping." The first round of duties was aimed at countering the alleged subsidies, while the new round is aimed at other factors that the U.S. says is fueling the alleged dumping.

Canada has denied the U.S.'s allegations, and Prime Minister Justin Trudeau at one point said he would carefully consider retaliatory measures against the U.S. The U.S. last year imported more than $5 billion worth of softwood lumber from Canada.

The Commerce Department said that the duties announced Monday were "preliminary" and that it would reach a final determination on Sept. 7. The move could have an immediate effect on trade,pu as the U.S. government will start collecting deposits from imports based on the new ruling.

"I remain optimistic that we will reach a negotiated solution on softwood lumber," U.S. Commerce Secretary Wilbur Ross said in a statement announcing the new moves. But, he added, "until we do we will continue to vigorously apply...laws to stand up for American companies and their workers."

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Canadian lumber producers on Monday said that while they viewed the new duties as unjust, they were actually a bit relieved because they were at the lower end of what the industry was expecting.

"We don't believe any duties are appropriate," said Susan Yurkovich, president of the BC Lumber Trade Council, which represents lumber producers in British Columbia, where half of Canadian softwood exports to the U.S come from. The new round of duties, she added, combined with what was previously announced, will continue to "punish American consumers who are faced with higher lumber prices when they buy, build or renovate their home."

In a statement, Canada said it was "deeply disappointed" with the Commerce department's decision. The duties imposed "are based on a flawed rationale that is damaging to workers, communities and consumers in Canada and the U.S."

Meanwhile, the U.S. Lumber Coalition, an industry lobby group, said it applauded Washington's move to counter Canada's "unfair trading practices."

While Mr. Ross and President Donald Trump have both prominently highlighted the dispute, it actually dates back decades, and the U.S. has repeatedly over the years taken measures to try to block Canadian softwood.

The battle takes on an added significance this year, as the two countries -- along with Mexico -- are also renegotiating the 23-year-old North American Free Trade Agreement. Some officials and analysts have expressed concern that tensions over the timber trade could complicate efforts to reshape the broader trading relationship.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

June 26, 2017 21:31 ET (01:31 GMT)