Some of Canada’s biggest industries are already strategizing on how to deal with U.S. president-elect Donald Trump's threats to impose stiff tariffs on all goods entering the U.S. Economists say Canada’s GDP could be cut by as much as five per cent.
It's a risk that has not gone unnoticed by politicians and policymakers in B.C.
"America is B.C.'s largest trading partner and our closest international ally," wrote provincial Conservative Leader John Rustad in a post on X congratulating Trump on his win this week. "Now, B.C.'s number #1 priority must be to push America for progress on ending punitive softwood lumber tariffs."
"Timber is our biggest export," said Laura Jones, CEO of the Business Council of B.C. And while a tariff would be a problem for most industries, she said the impact on softwood lumber is "almost in a different league… that could get worse, if one could imagine it getting worse."
B.C.'s governing party, the NDP, has also called the U.S. duties "punishing" and has repeatedly called for them to be repealed.
But they are popular with producers in the United States, with the U.S. Lumber Coalition saying their imposition "substantiates that Canada continues to subsidize and dump its softwood lumber products into the United States."
The argument from south of the border, dating back to the 1980s, is that the pricing system used in Canada is unfair. In places like B.C., the government sets so-called stumpage fees for timber harvested on publicly-owned Crown land.
For producers in the United States, this amounts to a subsidy when compared to the market rates they have to pay.
At times, long-term agreements have been reached between the two countries, most recently with the 2006 Softwood Lumber Agreement which expired in 2015 and has not successfully been renegotiated.
Mike Egli says his contractor business relies heavily on Canfor's Plateau sawmill in Vanderhoof, B.C., which is slated for closure or sale by the end of the year. (Benoit Ferradini/Radio-Canada) Since then, new duties have been imposed under both Trump in his first term as U.S. president, and Joe Biden, who has been in power during the most recent hikes.
At the same time, softwood production in B.C. has declined, while in the United States, it has soared. Industry analysis group Fastmarkets says U.S. softwood production is on track to hit its highest level since 2005 and is set to outpace Canadian production for the first time since the 1970s, according to a report from Bloomberg.
And B.C. companies are following the trend: Both Canfor and West Fraser, whose headquarters are in Vancouver, now operate more mills in the United States than in Canada as they shut down or curtail operations at home.
A map included in its 2023 year-end report shows Vancouver-based West Fraser's operations in Canada and the United States, with green dots representing mills. (West Fraser) While that's a hit to British Columbia, companies in the United States welcome it as a win: "Milling more lumber from American trees by American workers to build American homes also creates more American jobs… in typically rural communities that support these workers" the U.S. Lumber Coalition says.
Russ Taylor, a Vancouver-based analyst, says that softwood duties imposed on Canada by the U.S. are expected to increase to about 30 per cent next August, and a 10 percent tariff from Trump on top of that would be "highly prohibitive" to B.C. producers.
"If you're an American company — you're going OK, that's good for us, very good for us," Taylor said, even as it results in devastation for similarly rural communities in B.C.
No easy transition: analyst
He said Canada does have some allies in the United States, most notably the National Association of Homebuilders, which argues that duties and tariffs are negatively affecting the cost of housing in the United States.
But while the group wants a new softwood deal negotiated, it also wants the United States to "reduce our nation's reliance on Canadian lumber imports" and turn to other countries to help make up the difference, something that could harm B.C. even without tariffs.
Taylor says while B.C. and Canada have at times tried to diversify lumber export markets to include Asia and Europe, It is still highly reliant on the United States, and that is unlikely to change under current market trends.
Trying to use more wood in Canada, he said, would also be a problem because the Canadian market for lumber can only absorb about one-third of what the country currently produces.
"Our mills are designed for the United States," he said. "It's not an easy transition."