U.S. Sets Final Tariffs for Canadian Softwood Lumber -- Update

The U.S. set big tariffs on imports of softwood lumber from Canada, increasing economic tensions between Washington and Ottawa at a time when North America's trade architecture is in jeopardy.

The U.S. Commerce Department announced its final tariffs Thursday, saying Canadian lumber mills have benefited from improper subsidies and dumped lumber at unfairly low prices on the American market, hurting competing U.S. mills. The tariffs will take full effect at the border if a U.S. trade body confirms that the Canadian practices injured the U.S. industry, a decision expected later this month.

Top Canadian officials called the tariffs "unfair, unwarranted and deeply troubling" and asked for them to be reversed.

The lumber dispute, a similar tariff fight over Bombardier Inc. jets made in Canada, and a disagreement over milk products have dominated business headlines in Canada this year, raising concerns that the trade friction could spill over into the neighbors' broader bilateral ties. Aides say President Donald Trump and Canadian Prime Minister Justin Trudeau have a strong personal relationship, but at the negotiating table Canadian, Mexican and U.S. officials are divided in their efforts to renegotiate the North American Free Trade Agreement.

"We will forcefully defend Canada's softwood lumber industry, including through litigation, and we expect to prevail as we have in the past," Canadian Foreign Minister Chrystia Freeland and Natural Resources Minister Jim Carr said in a joint statement. "We are reviewing our options, including legal action through the North American Free Trade Agreement and the World Trade Organization."

Partly due to concerns about the lumber fight, the Trump administration is seeking to use the current Nafta negotiations to eliminate a special dispute-resolution panel that reviews the tariffs one Nafta country imposes on another.

"While I am disappointed that a negotiated agreement could not be made between domestic and Canadian softwood producers, the U.S. is committed to free, fair and reciprocal trade with Canada," Commerce Secretary Wilbur Ross said. "This decision is based on a full and unbiased review of the facts in an open and transparent process that defends American workers and businesses from unfair trade practices."

The Commerce Department sets out strict rules for avoiding political influence or undue industry interference in tariff cases. But protecting lumber mills dovetails with Mr. Trump's "America first" trade policy, and lawmakers from timber-growing areas of the Southeast and Pacific Northwest have made it clear they support a tough line with Canada to protect American mill workers and timberland owners.

"With today's action by the Commerce Department, American lumber mills and millworkers are one step closer to getting hard-won relief against subsidized and dumped Canadian softwood lumber," said Sen. Ron Wyden of Oregon, the top Democrat on the Senate committee that oversees trade.

U.S. and Canadian officials have been working for months with industry representatives to come to an agreement to avoid the tariffs announced Thursday, which if permanently imposed will add a duty of around 20% or more, depending on the Canadian mill.

"This is verification of the process working, the way the process is set up to protect us and protect our industry," said Jason Brochu, co-chairman of the U.S. Lumber Coalition and co-president of Pleasant River Lumber Co. in Maine. "Overall we're very happy with the results," he said in an interview.

U.S. lumber mills say their Canadian rivals benefit from access to logs harvested from public land and sold at below-market prices. Canadian officials deny having an unfair advantage.

Both sides say they would like to strike a deal on lumber trade to avoid tariffs. The U.S. industry wants Canada to limit its share of the U.S. softwood lumber market strictly below a set level. The Canadian industry wants to retain the right to supply larger amounts of lumber to U.S. consumers when needed, according to people following the talks. Meanwhile, U.S. home builders are fighting the tariffs because they raise the price of home construction.

"Home builders and home owners are already dealing with the monumental rebuilding efforts in the aftermath of the devastating hurricane season and California wildfires," said Granger MacDonald, chairman of the National Association of Home Builders, in a statement. "This tariff only adds to the burden by harming housing affordability and artificially boosting the price of lumber."

Write to William Mauldin at william.mauldin@wsj.com and Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

November 02, 2017 15:11 ET (19:11 GMT)