The nine billion dollars in the softwood lumber tariffs account will remain there until the politicians get together and agree on how it is to be divided between the two countries. As described in previous articles on the softwood lumber agreement (SLA) Steven Harper was able to broker a deal in 2006 with the help of the World Trade Organization arbitration (WTO decision) which saw four billion dollars returned to Canada and one billion dollars go to the U.S.A.
Now nine years later the account has grown to nine billion with the Americans stalling about having the WTO involved again which is hard to understand considering how much of the Canadian four billion ended up in the United States following massive investments there by the same companies that had the tariffs levied against them. Canadian lumber manufacturers are now the major players in the southern states with some companies also investing in Europe with nice profits coming from these purchases and being in a much more competitive position worldwide.
It should also be pointed out to the U.S.A. that when Canadian lumber manufacturers are purchasing U.S. mills the Americans are getting much more than Canadian funds. Most important is the Canadian expertise that comes with the purchases including the mill owners and staff as well as access to experienced mill construction companies who have worked with the Canadian companies for decades resulting in first class manufacturing facilities.
While the Canadian owners appreciated the very different log profiles they were not impressed with the antiquated mill facilities and went about planning for upgrades almost immediately after purchasing the U.S. lumber companies. While many Canadian mill upgrades in the past resulted in loss of jobs (many of which were repetitive and dangerous) companies have managed to not only improve production output, and safer (eg with dust control) but in some cases the improved profit picture has allowed new manufacturing systems and helped reduce job losses. Note LSJ Dec 2024 Edgewood Forest products mill upgrade.
Although the next prime minister may have a short-lived position, it will give the new PM the opportunity to test their negotiating skills with Mr Trump and demonstrate that there is plenty of money coming from Canada into the U.S.A. With the U.S. apparently not wanting the WTO being involved it could be they may fear a worse outcome than the previous arbitration which means we could start with a 90-to-10 split. That gives them a number close to what they got last time with the good possibility of more to come as in the past settlement.
We should also point out that some of Canadian companies have been paying close to 20 percent tariffs for years already and still manage to sell millions of board feet of our superior lumber into their country. With the ongoing climate changes pressures especially the loss of thousands of structures in California alone and with the pressures on their timber land base we should be able to convince them that cooperation may be much better than a stick approach.
According to a January 2025 article in Canadian Biomass, a number of Canadian lumber companies are advising customers that they will add 25 percent to lumber exports to the U.S. when the tariff is announced. With the Canadian mills already paying an average of 14.4 per cent import duties on U.S. shipments , they have no alternative but to increase prices to cover the potential tariff.
