Experts: Tariff threat from Trump would increase costs of Spokane homes
Threats by President-elect Donald Trump to impose sweeping new tariffs on the United States’ top trading partners are revving up an old trade war that has pitted Washington, Oregon and Idaho foresters against Canada for more than 40 years.
Trump wrote last week in a social media post he would impose the 25% tariff on Mexico and Canada on his first day in office to halt the “invasion” of drugs and migrants. He also vowed to introduce an additional 10% tariff on goods from China, the main source of precursor chemicals to make fentanyl.
It’s not clear whether that 25% tariff on lumber from Canada would cap at that amount or be added to the existing 14.5% tariff on those forest products that were put in place this year by President Joe Biden.
Regardless, it would make it more costly for Spokane-area residents to build a home, said Joel White, executive officer of the Spokane Home Builders Association.
“I’m guessing you will see a 10% price increase” for building materials, White said. “That will affect the price of homes. If you raise the price of lumber, the builders are not going to absorb all of that.”
He noted that local lumber prices had already climbed about 18% in October just on talk of new Canadian tariffs.
Lori Otto Punke, president of the Washington Council on International Trade, blasted the proposed tariffs for what they could do to area jobs.
“Canada, Mexico, and China are the Northwest’s top trading partners, and 40% of the jobs in Washington state are tied to trade,” she wrote in a news release. “Tariffs will not only eliminate jobs, but families will be hit with even more inflation on goods they need to buy.
White, of the home builders, noted that Trump’s plan has yet to take effect.
“It’s the power of Donald Trump’s erratic negotiation skills,” White said. “He does threaten things and uses them as a negotiating tool. But we’ll see. He’s also gone forward with a lot of things he’s said.”
Complicated trade picture
The United States and Canada have traded barbs over lumber production dating back to 1982. The U.S. has argued that their counterparts to the north unfairly subsidize the lumber industry because companies pay less to cut trees from government-owned land.
They have argued for decades that Canada could set lower prices to harvest trees than U.S. producers, who mostly take trees from privately owned tracts of land.
Canada leads the world in production of forest products, which includes everything from raw lumber used for building to pulp used for making paper. The U.S. ranks second for world production, and Oregon and Washington lead the nation for where those trees are harvested.
While both countries export forest products, they also represent the top importers of forest products from the other.
White said the arrangement can be confusing.
“Right now, we ship a lot of our wood overseas. And, we buy Canadian lumber. That seems crazy to me,” he said.
But he compared the situation to Washington apples. Some of the best-quality apples are sent to Japan.
“That’s what the Japanese demand. We ship the high-end ones overseas and keep the not-great ones here,” he said of the apples. Other countries “will pay higher prices for our lumber.”
While the numbers vary year to year, Canada exports about three-quarters of all its forest products to the U.S.
According to the U.S. International Trade Commission, the U.S. imported about $51.4 billion worth of forest products in 2023 and some $20 billion, or 40.5%, came from Canada.
China actually ranked second place with $6.89 billion of forest products sent to the U.S., which made up 13% of American imports.
However, that trade flowed both ways. Canada was also the largest importer of American forest products.
All told, the U.S. exported a total of about $38.1 billion in forest products in 2023.
The neighbors to the north were the top importers, bringing in about $10.1 billion worth of forest products in 2023, which was about 26.5% of all the exports.
Mexico was the recipient of the second most imports at 16.9%, and China was third with 10.2% of American lumber products.
Overall trade
More than $1.3 trillion worth of goods last year came from the three countries that Trump said he will target with new tariffs in the first day of his second term, according to U.S. Census Bureau data.
Those items include everything from crude oil to cars to smartphones.
And the biggest trading partners are the neighbors to the south.
Mexico
The United States conducts more trade with Mexico than any other country. It imported $475 billion in goods from Mexico last year and exported almost $323 billion.
About 80% of Mexican exports go to the United States, and the vast majority of those last year were manufactured goods, according to bank BBVA.
The United States imported more than $400 billion worth of manufactured goods, compared with about $20 billion of products from the Mexican agriculture, forestry and livestock sectors and about the same from the oil, gas and mining sectors, according to the bank.
Those goods included cars and car parts, computers and other electrical equipment, beverages, medical instruments and household appliances.
Mexico President Claudia Sheinbaum said last week that Mexico was prepared to respond with its own tariffs.
“President Trump, it isn’t with threats or tariffs that we resolve the migratory phenomenon or the abuse of drugs in the United States,” Sheinbaum said as she read a letter she had written to the incoming U.S. leader. “What’s needed to confront these great challenges is cooperation and understanding.”
But she changed her tone on Thursday, after speaking directly with Trump.
Trump called the conversation “wonderful.” For her part, Sheinbaum said “we agreed there will be a good relationship.” But it was unclear whether the tariff threat had subsided. Sheinbaum said they didn’t broach the subject.
Canada
Canada remains the United States’ second-ranked trading partner. The U.S. imported more than $418 billion in goods from Canada in 2023, and exported $354 billion.
The top goods that the United States imports from Canada are crude oil and related products such as petroleum gas; vehicles such as cars and car parts; and machinery such as turbines, engines and construction equipment parts, according to global research firm Trading Economics.
The United States also imports billions in plastics, pharmaceuticals, wood and paper, metals such as aluminum, iron and gold, and agricultural products from Canada.
A significant change in U.S. trade policy could have serious ramifications for Canada: More than three-quarters of Canadian export goods go to the United States, and almost half of Canada’s import goods in turn come from its southern neighbor.
“We need to recognize that it’s not going to be business as usual,” Perrin Beatty, former head of the Canadian Chamber of Commerce, told the Canadian Broadcasting Corp. “We have a president who, instead of seeing this as being the special relationship between Canada and the United States, sees the relationship much more on a transactional basis.”
China
China is the United States’ third-largest trading partner. The United States imported almost $427 billion in goods last year and exported almost $148 billion.
The top goods the United States imported from China last year were electronics, including phones; machinery such as computers; toys, games and sporting equipment; furniture; and plastics, according to Trading Economics. It also imports billions in a wide variety of items such as medical equipment, clothes and shoes, chemicals and pharmaceuticals.
The United States buys about 15% of China’s exports and is its largest destination market, according to Trading Economics.
Trump has threatened to add 10% to the existing tariffs. That apparently will pile on to existing tariff hikes put in place this May by Biden.
At that time, Biden raised the tariff for China from 25% to 100% for electronic vehicles, issued a 25% tariff on certain steel and aluminum products, raised the tariff on lithium ion batteries for EVS and battery parts from 7.5% to 25%, while solar cells went from 25% to 50%, and medical products went from no tariff to 50%.
Otto Punke, of the Washington trade council, noted that tariffs often have unintended consequences that cost Washington jobs and rarely achieve their stated goals.
“Rather than stoking the fires of protectionism, we need to establish more trade agreements that benefit all parties involved,” she wrote. “Knitting economies together through trade forges bonds of peace and prosperity.”
The Washington Post contributed to this story.