Cross-border quarrels between Canada and the U.S. over goods and supply are nothing new, having its roots in the pre-Confederation days of the Jay Treaty of 1794, said Ian Dunn.
The president-CEO of the 51-member Ontario Forest Industries Association (OFIA) calls the ongoing fight over exported Canadian lumber to the U.S. “probably the largest global trade dispute” since the close of the Second World War.
“Tariffs are not a new thing for the lumber producers and our membership,” said Dunn.
While the Trump administration decided Feb. 3 to punt 25 per cent tariffs on Canadian goods down the road for 30 days, the threat to Ontario’s already vulnerable forestry industry remains very real.
About 97 per cent of Ontario’s forest products exports annually – amounting to $7.7 billion of trade – heads to the U.S. in the form of lumber, pulp, newsprint and structural panels.
Slap on a 25 per cent tariff and that’s close to $2 billion coming out of Ontario.
“If it’s $2 billion, from talking to members, it’s going to be very, very difficult (for producers) to continue with their operations,” said Dunn.
Tack on top of that an expected increase in softwood lumber duties by this summer and it could deliver a severe blow to the struggling industry, leaning under the weight of U.S. dumping and countervailing duties since 2017.
The current Canadian lumber duties on shipments to the U.S. is 14.4 per cent. By August, it’s likely lumber duties will be around 30 per cent as part of the next U.S. government review.
Should the combination of increased duties and Trump tariffs remain in place for an extended period of time, Ontario’s forest industry would be a shadow of its former self.
“The bottom line is that, if there is an industry left in Ontario, it would be very small," said Dunn.
Though plenty of factors remain at play with the exchange rate and market conditions, for Canadian lumber producers currently, “it’s basically a break-even proposition, even with a 15 per cent tariff rate.”
The impacts have already hit the Canadian forest industry hard, particularly in Western Canada with sawmill closures and production curtailments.
Some OFIA members were shutting down mills last year after being in operations for decades, others were removing shifts and taking operational downtime, said Dunn.
“It’s already being felt.”
It’s been a challenging environment for forestry for quite some time in a perfect storm scenario in Ontario with the idling of mills in Espanola and Terrace Bay.
“Longer term, people are bullish on lumber and forest products in general, but it’s going to be a period of pain,” said Dunn,
A number of OFIA members with U.S. customers are concerned about their ability to maintain the supply chain across the border as considerable lumber production capacity has left Canada and settled in the southern U.S.
Time and again, Canadian producers have run up against a very wealthy and politically well-connected American lumber lobby in Washington and a compliant U.S. Department of Commerce that’s maintained import duties on lumber over the last decade.
Canadian manufacturers and OFIA are hoping its American customers and U.S. construction associations can help turn the tide.
The tariff threat has spurred the American National Association of Home Builders and chairman Carl Harris to state that this new trade barrier “will have the opposite effect” of the Trump administration’s goal to “lower the cost of housing and increase housing supply.”
In urging the White House to reconsider, the advocacy group forecasts new tariffs on Canada, China and Mexico will raise the cost of imported material by $3 million to $4 million a year and discourage new development. American consumers will pay the downloaded cost in higher home prices.
Dunn said he places great faith in Premier Doug Ford and the Council of Federation to defend Ontario’s interests in pursuing negotiations and avoid new tariffs.
“Ultimately, it will be a very political discussion and a negotiated settlement,” he said, “but what I’m very confident in the bureaucracy, federally and provincially, to provide the best information and best strategy to our elected officials.”
Politically, Dunn would like to see Ottawa do more to provide support for the industry.
He points to a Quebec-federal program that will invest $540 million over seven years to prop up that province’s forestry sector. A key component is $100 million in financial assurances, in the form of loans, to those businesses struggling with cash issues, especially those impacted by the softwood lumber dispute.
Federally, the door’s been opened, Dunn said. OFIA and the industry has met with the federal government to discuss such a program.
“We’ve had some good conversations but on something like a financial backstop, we’re awaiting a response.”
While government negotiates a path forward, Dunn notes there are opportunities closer to home.
OFIA’s message to Queen’s Park is to help expand the domestic market by creating a home-spun energy supply chain.
“We import $1.7 billion worth of natural gas into Ontario from the U.S.,” said Dunn.
“There’s a real opportunity to use wood fibre residuals produced at the mill to produce a made-in-Ontario fuel,” that’s not dependent on U.S. natural gas.
Currently, there are facilities in Ontario that can consume more fibre and produce more electricity that the province needs. Many companies are eyeing Ontario to establish biofuel, biogas and biochar facilities.
The transition may be a couple of years down the road, Dunn said, but “that’s a real opportunity to keep wood flowing in the province.”
