Home prices in the U.S. are at an all-time high, largely due to the ballooning cost of new construction. Construction supplies are in short supply and high demand, particularly lumber. Now, despite having stated that it would be making every possible effort to reduce home prices, the Biden Administration has doubled the duties on Canadian softwood imports.
On Nov. 24, the White House raised Canadian softwood lumber import duties from 8.99% to 17.9%. Softwood is an essential part of new construction, so it's no surprise that home builders are viewing this change negatively.
"With the nation in the midst of a housing affordability crisis, the Biden administration has moved to slap a huge, unwanted tax hike on American home buyers and renters," the National Association of Home Builders (NAHB) Chairman Chuck Fowke said in a statement. "This is the worst time to add needless housing costs onto the backs of hardworking American families."
In a statement released on Sept. 1, the White House pointed to the large number of homes being purchased by big investors rather than homeowners as a driving force behind rising home prices. According to the statement, between one-in-six and one-in-four homes in the U.S. were purchased by big investors this year, depending on the location. The Administration vowed to counter-act this issue.
"President Biden is committed to using every tool available in government to produce more affordable housing supply as quickly as possible," the statement reads.
The statement included descriptions of sixteen different initiatives aimed at reducing home costs, in addition to efforts included in the Build Back Better Agenda. The Administration plans to increase the supply of affordable rental units, boost the number of 2-4 unit properties, and establish a number of new initiatives to be taken by the Department of Housing and Urban Development (HUD), the Treasury Department, Fannie Mae and Freddie Mac, the Federal Housing Administration (FHA), and others.
Regarding the increase in Canadian lumber duties, the Administration claims that the change was made in order to maintain market fairness. Rather than tariffs, the White House says these lumber taxes are actually "antidumping and countervailing duties."
"The United States' antidumping and countervailing duty (AD/CVD) laws provide U.S. businesses and workers with a transparent and internationally-accepted mechanism to seek relief from the market-distorting effects caused by unfair pricing or subsidization from a foreign trading partner," said a spokesperson for the Commerce Department.
The increase in duties has supporters as well as critics: the U.S. Lumber Coalition says that the increase will help American lumber producers compete with their Canadian counterparts. However, some analysts argue that the Coalition's motives aren't so pure. Instead, it's possible that the group is merely happy to see increases in the price they can charge for softwood in the U.S.
The Coalition has been arguing for years that Canadian lumber producers have an unfair advantage due to the country's alleged policy of giving Canadian lumber harvesters cheaper rates for work done on public land. Canada has maintained that it doesn't subsidize Canadian lumber producers.
While the Biden Administration may see merit in the Coalition's argument, the World Trade Organization (WTO) and other investigations have repeatedly investigated the issue, siding with Canada in most cases.
The George W. Bush and Trump Administrations both saw pushback from the WTO regarding increases in Canadian lumber duties. In 2006, Bush was forced to pay back millions of dollars in additional duties to Canada thanks to a WTO ruling. In 2017, the WTO reported that Trump's 20% duties on Canadian lumber weren't justified, and, while Trump vowed to fight the WTO ruling, the duties were reduced to 9% by 2020.
"At every step of the way, rulings have found Canada to be a fair trading partner," Canada's international trade minister, Mary Ng, said in a statement. "These unjustified duties harm Canadian communities, businesses, and workers. They are also a tax on U.S. consumers, raising the costs of housing, renovations, and rentals at a time when housing affordability is already a significant concern for many."