The Current - U.S. hits Canadian lumber with new anti-dumping duties

Episode Date: August 12, 2025

Donald Trump often says 'tariff' is the most beautiful word in the dictionary. And it's been his favoured weapon in his global trade war. But it's not the only one. On Friday, the US commerce department announced a big hike in countervailing duties on Canadian softwood lumber. Combined with anti-dumping duties announced in July, Canadian lumber is now subject to duties of more than 35%. We talk about what this means for the industry.

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This is a CBC podcast. Hello, I'm Matt Galloway, and this is the current podcast. The mills on Mitchell Island along the Fraser River in Vancouver are still bustling. Massive machines continue to sort logs on their way to the saw. But there is concern this bustle could be in trouble. Donald Trump often says tariff is the most beautiful word in the dictionary. and it's been his favored weapon in his global trade war, but it's not the only one.

On Friday, the U.S. Commerce Department announced a big hike in countervailing duties on Canadian softwood lumber. Combined with anti-dumping duties announced in July, Canadian lumber is now subject to duties of more than 35%. The move has left the Canadian industry with lots of questions. Hi, my name is Gavie Gossal, and I'm a Western Red Cedar sales rep for Terminal Forest Products. I am concerned about this round.

It's a huge duty. 35% is something that's going to cripple a lot of companies. And, you know, I was out for lunch with an old colleague of mine at a different company, and they've shut down a major mill on Vancouver Island, and there's more of that, probably, that the industry is going to have to endure and if there's not a resolution that's or a negotiated settlement to this that's reasonable,

I really feel like this is going to be a, I don't want to say nail in the coffin, but a big hit to this industry that's already been hit quite a bit. So 35% on every shipment that goes across the line is a heck of a lot of money. And for some companies that are smaller and that can absorb, orbit, that could be it for them, right? So I hope it's a quick solution. Gabi Gossal is a sales representative at Terminal Forest Products, a sawmill in Vancouver. So joining me now is Brian Menzies. He's executive director of the Independent Wood Processors Association of BC. Good morning. Good morning, Rebecca.

You know, Brian, since Donald Trump took office, we've certainly been hearing a lot and learning a lot about tariffs, but anti-dumping and countervailing duties is different. Just walk us through what we're talking about here. Well, the point is that this is something we've been dealing with for eight years, right, since it first started, eight years now. Countervail duty is something that is described as a subsidy. So the American producers believe that our wood is subsidized because it comes off a crown land and we pay a tax to the government and we don't pay a fair enough tax on that.

The dumping side of that, though, is also added on, which pretends that a price of a product in the marketplace we're actually selling it for less than that product in that price place. So in other words, you know, we're being seen as just arbitrarily undermining anybody else selling in that market.

marketplace so that we can control the market. So 35 percent. Is that something Canadian wood producers have ever paid before or is that the highest we've seen? It's the highest we've ever had to pay. And there is a unique part of this is that it's retroactive to 2023, which is troubling because as we go through the process of appeals under the Kuzma Agreement with the United States and Mexico, we, if we exhaust those appeals, And it's not in our favor. Our little companies, and I do represent the small and medium-sized companies, they will be on the hook to pay what the difference was in 2023,

which is almost three times as much. And so how much would these companies stand to have to pay back? Is it, were you talking thousands, millions? Well, yes, millions, for sure. And where are they going to come up with that money? Well, they can't go to the customers. Going forward now, they'll put 35% on all their products that they sell into the U.S. market,

and the U.S. customers, unfortunately, pay for that, making their homes less affordable. But retroactively, each of these little companies have put up bonds to sell their wood into the U.S. market on the basis that if the Department of Commerce comes back with a new calculation, they'll be on the hook for it to pay for it. And in many cases, some of these small companies

have used up their line of credits or the company credits and have actually posted their homes as bonds that they promised to pay for this. Yeah. Your members then, what are they telling you? How many are in that kind of situation where they've posted their homes? Well, I don't know specifically the number,

but I could tell you this. Since the announcement of Prime Minister Carney came out, I've received many emails from our members asking when can we sign up for this help, because they need that help. Yeah. Do you expect how many job cuts do you expect then? Mill closures. We heard about one in that clip there.

What sort of expectations do you have? Well, I mean, the Canadian government in their announcement expects around 6,000 people to be laid off as a result of this or go through some sort of workforce adjustment, and they're setting some sides for funds for that. The difficulty has been is we, anticipated that this was going to happen. So we've been working pretty hard to sell or wood across the border for the year. But now the actual fence of 35% has come up.

I would say in the very near future, we're going to start seeing these small companies, which it's difficult for them to shut down for a couple of reasons. If they shut down, they're going to lose their employees. And it's really hard to keep employees in this business because they have to be skilled and they can go somewhere else to work. But the other part of it is they're losing customers and all of this start this dwindling downward on their companies.

This is an industry that has faced many other challenges. Just remind us what else these meals have been going through. Well, the other big thing in British Columbia is that while the Americans say that we're dumping into that marketplace or we're subsidized, it's pretty difficult. difficult for these small companies because they're so small to be able to do that because they just don't have the inventories to be able to do it. But the other part of it is the harvest levels in British Columbia in the last six years has dropped by 50%. I can throw out a bunch

of numbers, but there's 50% less wood available. And the companies I represent... And sorry, why is there much less wood available? Well, just the harvesting reductions in old growth cedar, for example, have been cut off to these companies. Many of these companies made their money by taking cedar and making it into a higher-end product, you know, like fencing or siding or decking and that sort of thing. But now that source of wood is no longer available. The other is that we've got a lot of discussions on who actually owns the land now with First Nations. so those conversations take time to figure out.

And just generally other economic and environmental objectives that we're trying to reach in British Columbia causes a reduction. Prime Minister Mark Carney announced a series of measures last week to help the industry. We're talking loan guarantees. How much will that help, do you think? Well, it'll help to an extent. I mean, we're just basically sharing the risk that we have with the federal government and they're coming on board as partners. So we'll still be on the hook. But it helps

us moving forward. I would say that that's part of it. Trying to diversify markets is helpful. That takes a long time. But also, I would say that the best results here would be a negotiated solution right now. This dispute, though, has been going on for more than 40 years. This is not just Trump, why do you think we could come up with a solution or resolution now? Well, I would say this, that first of all, the issue begins with who owns the land. So who owns the logs? On U.S. side, it's private companies. On the Canadian side, it's the government.

But now the ownership of the logs is moving off to private companies, which I would call First Nations, we'll be owning it. So we're looking at a similar situation to begin with. The small companies I represent, they don't actually harvest logs. They just buy lumber. They don't want logs, and they buy it on the open market. So in essence, we're similar to the American companies that are saying we're subsidized. But even more importantly, it's just if we don't deal with these problems between neighbors, we see these little problems start festering.

and they become bigger and bigger over time. And we've seen this with softened lumber. And it is what we call an industry-specific injury to the U.S. market. And the problem being is it escalates to other areas like copper and steel and aluminum that we're seeing now. We've got to solve these problems. Okay, Brian Menzies, thank you for this. Thank you very much. Brian Menzies is executive director of the Independent Wood Processors Association of BC.

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Tickets at ROM.com. For more on the broader impact of these increased duties, I'm joined by Kevin Mason, and he's a managing director of ERA Forest Products Research. It's an independent financial research company whose clients are mostly large investors, and he joins me now from Gibson's BC. Good morning. Good morning, Rebecca. What do you make of what you just heard there about the concerns from Brian Menzies? Yes, well, I think the concerns are held by, you know, for Brian, for his firms,

for everyone in the Canadian industry but it's particular hard for a lot of the smaller companies and that is they're unfortunately going to probably suffer more a lot of the big public companies and even some of the very large private have other options are diversified a little bit more so they're impacted a lot but not quite as much as some of the single-focused smaller producers you know the US lumber industry and we've talked about this with Brian as well

It has long claimed that Canada is unfairly subsidizing its industry, dumping cheap wood into its market. So I have a clip here from a video made by the U.S. Lumber Coalition. This is Craig Kilgore of Southport Lumber. Have a listen. When I have to educate my customer on how they're able to supply lumber at so cheap of a price, it really comes down to that the Canadians are allocated logs, whereas in the U.S., it's a market-based timber supply.

So when it really comes down to it, we're competing against the Canadian government and a system versus in the U.S. where we're competing against companies. Kevin, is there any merit to that claim because a lot of the debate here hinges on that argument? I think that, you know, that is something that, you know, in years past, you know, I think there was some argument that Canada would, obviously, we wanted to, and some governments were a little bit more active than others. You would make sure in a very weak market, you would still continue to supply logs and make sure that the mills were running. So you sort of had a bit more focus on workers than necessarily, you know, adjusting to weak markets. And so the U.S. used to have a, you know, kind of a legitimate beef that in weak markets, normally you would see sawmills, you know, take some downtime and or close a mill and take product out of the market.

that's kind of how you would do things in the U.S., but in Canada, it didn't. So, but that has changed. That's an argument for, from decades ago, and now you've got a lot of the pricing systems, the stumpage, as they call it, you know, what the governments charge the companies for cutting wood, a lot of that is now using a market-based pricing system. So it's tied into the market, so the companies are reactive. So a lot of that argument from the U.S. might have held a little bit of water decades ago, but no longer. And if you look at the reality, the highest cost logs from a, you know, and you've got American firms that operate in B.C.

And recently we had one sell out of B.C. The highest cost logs are in British Columbia right now, anywhere in North America. Why is that? Why do Americans like Canadian software so much? Part of it, it's the fiber. And that's, you know, that's one of the things that, you know, when Trump sort of throws out sort of missives that, you know, we don't need Canadian wood. We've got all the wood we want. It's true. There's a lot of wood, specifically in the U.S. South. But the type of fiber, you know, there are quite the different nuances. And the fiber we have in Canada is far better for building. It's more dimensionally stable, doesn't tend to twist or crack as much. It's lighter, takes the nail better. So builders in the U.S., you know, a lot of them prefer it. You know, and even ones in the U.S. south, you know, the southern pine is right in their backyard.

And they are paying right now. There's builders in the U.S. They're paying $250 to $280 more per thousand than they do for, you know, U.S. southern pine. But wouldn't builders in other countries also prefer Canadian lumber? And I guess the question is, why have we deployed? depended on the U.S. market for so long when it's been so adversarial to towards this sector? Well, that's the, you know, if you look at the history of this, we've really, you know, we're a small population country with an enormous amount of fiber.

And the U.S. has always needed more fiber than they could produce. And so just, you know, over the years, over the decades and centuries, frankly, we've, You know, we've been there to help supply the U.S. industry. Generally, we've supplied around, you know, a third, 30 to 33 percent. And, you know, lately. So we used to have a softwood lumber deal, started back in 2006. That expired in 2015. And since then, we're sort of going back on forth with these duties.

But in that time that we've, that the U.S. has hit Canada, our market share has shrunk. So we've gone from 30% down to roughly 23, 24%, but the U.S. is still importing roughly 30% of their needs, and it's getting backfilled by Europe. So as the U.S. pushes Canada out, Europe is stepping in. So, you know, the reality is that the U.S. needs to import wood. You know, yes, they have a lot of southern pine, but a lot of people prefer other species. and the European species is very similar to the Canadians. So a lot of the builders prefer to pay the price to import that. I just want to go back to something Brian Menzies talked about,

and that was how there are some land disputes, of course, in Canada around who owns the lumber and First Nations, of course, weighing into that. And how much is that complicating this whole dispute with the U.S.? You know, I think from the U.S. side, you know, if you talk to people on the U.S. side, you know, I don't think that's really moving the needle for them. You know, it's a big issue within Canada, and particularly B.C. has a lot of challenges in that regard, sort of getting all that figured out. And there is, you know, the First Nations are getting more and more control of the force. And there's sort of a subtle hope, I think, by some, that if you've got. But, you know, right now we have, you know, there's over 200 First Nations in British Columbia alone. As they take more and more control over the resource, you know, I think there's sort of this hope that the U.S. is going to view things differently and think that, hey, you know, we now have a open market and it will change the future of the dispute. And I, you know, I think that's a little perhaps overly optimistic analysis because we've seen no indication that the U.S. Coalition is kind of really going to change their approach.

So, you know, that's one thing that, you know, that's where I think, and this is what sort of Brian has, you know, hinted in his thing, is that, you know, we really need a softwood lumber deal. and hoping that the U.S. is not going to come, you know, come at us with duties. And perhaps the next threat is tariffs in addition to duties, you know, hoping that changes and giving more and more to First Nations that that's going to change things. I don't know. I think that's overly optimistic. I just want to talk more about the Prime Minister announcement last week in which he suggested there's money, there's help coming, loans, guarantee, loans coming for the industry. He also talked about value-added production, funding for that.

Have a listen. We will provide an additional $500 million, largely in grants and contributions to supercharge new product development and new market diversification. Products such as reinforced timber and low-carbon wood fiber-based insulation materials that are used in prefabricated and modular housing. We heard about 6,000 jobs potentially lost through all of this. Is there an opportunity to keep those jobs if we move towards, you know, a value chain and become more than just hewers of wood? And, you know, that's a, you know, with this dispute for, you know, we've been in a very intense part of this dispute since, basically, over the last 40 years, basically since the early 80s, we've been going back and forth on, on disputes with the U.S. So we're in the midst of

you know, what they called, we had, you know, softwood lumber five. So we've had a bunch of series of different disputes, and we were just on to the next iteration. And because of these never-ending disputes, we have really explored a lot of that. We've gone on trade missions all over the world. There's been dozens and dozens of trade missions trying to find new places for the product. We've tried moving up the value chain and different things. The latest kind of iteration, if you will, of that is sort of the mass timber, the emergence of mass timber, where you can hope that wood can supplant a lot of the, some of the buildings that we're using, you know, steel and concrete and different things.

You can move mass timber into that. So there are areas where we are trying to use wood more and use it in other applications. but, you know, other people in the world are doing it as well. And, you know, you look at the Europeans, you talk to some European sawmillers, and they are, you know, they've developed their markets and their business to sell globally. You know, and some of them have a lot more flexibility in their mills and different things. So it's not, it's going to be a very difficult process. It's something we've tried, we've attempted, but, you know, most of our mills,

are geared to serve the U.S. market. You know, we've had this dispute, as you've said, ongoing for four decades, and this is the worst we've seen it, 35% potentially. Can the Canadian softwood industry survive if this is the worst it's been? Well, that's, you know, I kind of harken back to that earlier comment about the fact that, you know, the U.S. needs our fiber, and they're going to pay up. The unfortunate part is, you know, there are, going to be casualties along the way because right now the U.S. market is kind of demand is soft.

You know, the housing market is weakening. The biggest use for lumber is the repair and remodel market. And even that is slipping a little bit in the U.S. as well. So, you know, the two biggest drivers of, you know, lumber demand in the U.S., the, you know, R&R market being the biggest and then the second biggest being home construction, both of those are in decline this year. So you've got a weakening demand environment. And, you know, so I think when you put these tariffs on, the U.S. will still need to import stuff from Canada, but there will be less that they'll need to import. And when you, you know, pop up prices 35 percent, the Canadians will try.

You know, you're going to try to pass that along, as sort of as Brian had hinted. But, you know, right now they've tried that just recently. They've been sort of trying to pass on those costs, and very little volume is transacting. You know, some people that need product are doing it, but right now, you know, we're going to see those prices. You're not going to pass off the full duty cost. There will be closers in Canada. And I think, you know, BC, we are going to see some here, but also in other parts of the country. We already saw, you know, three different mills.

in Quebec, a company called Arbeck. They took down three mills in Quebec. And another company took a small mill down as well. Okay. Kevin Mason, we've run out of time. I know it's a complicated issue with four decades of history, so hard to get through. But we appreciate you making sense of it for us. Perfect. Thanks, Rebecca. Kevin Mason is managing director of ERA Forest Products Research. We reached him in Gibson's B.C. You've been listening to the current podcast. My name is Matt Galloway. Thanks for listening. I'll talk to you soon. For more CBC podcasts, go to cBC.ca.ca slash podcasts.