N.B. forestry towns on edge as U.S. tariffs, duties pile up
Trump’s new measures just the latest protectionist moves adding to cost of Canadian wood for U.S. buyers
Like other New Brunswick forestry towns, the rural community of Kedgwick is on edge.
The economy of the municipality tucked in the middle of the woods in the northwest of the province relies on two major sawmills, J.D. Irving Ltd. and Groupe Savoie, and several smaller forest operations.
"The forest is the blood that runs in our veins," says Mayor Éric Gagnon.
"Around here we know what to do with a tree. Trees are really important to us. Just about the entire population, if they don't work directly with wood, a part of their work comes from it."
So Gagnon has been paying attention to every twist and turn in the Trump tariff saga while staying in touch by phone with the operators of the local mills.
"We're checking in with them every day or two, just to stay up to date … it's a very live issue," he said.
"It's hard to predict the unpredictable with what's happening with our American friends. Mr. Trump has a bit of a hard time staying on track."
About 24,000 New Brunswickers work in the forestry sector, and 80 per cent of the industry's output — softwood and hardwood lumber, pulp and paper, shingles, fibre and strand board — goes to the United States.
Irving, the industry group Forest NB and the New Brunswick Lumber Producers released a fact sheet last month on the threat represented by the tariffs, estimating that seven out of 10 municipalities in the province are home to at least one forestry business.
They were not giving media interviews this week.
"At this time it is too early to determine the full level of impact these tariffs will cause," Forest NB spokesperson Andy Tree said in an email statement.
"We continue working to understand the details of what the announced tariffs will mean for forest sector operations across the province."
J.D. Irving issued a nearly identical statement.
Some of the province's wood exports were already under American protectionist pressure before Donald Trump returned to the White House.
In 2017 the U.S. added New Brunswick to the provinces whose softwood exports are subject to anti-dumping and countervailing duties.
U.S. competitors lobbied for the move because, they argued, increased harvesting on Crown land amounted to a larger public subsidy, which made the province's lumber artificially cheap for American buyers.
The combined duty rate is reviewed annually and this year is 14.4 per cent for all New Brunswick mills except Irving, which has an 11.5 per cent rate.
This week Trump's Commerce Department filed a notice to increase one part of that combined rate, which if adopted would increase the combined rate to 26.8 per cent for most mills and 23.9 per cent for JDI.
The administration has also launched an investigation into imposing additional duties on national security grounds.
Add the 25 per cent tariffs and it amounts to a crushing increase to the cost of Canadian softwood sold in the U.S.
"To put it simply, there's really not many Canadian softwood lumber mills that are going to be able to ship profitably into the U.S. market at the existing prices," said Dustin Jalbert, a wood products economist with the U.S. price forecasting firm Fastmarkets.
The market share for Canadian wood in the U.S. has dropped from 34 per cent in 2000 to 23 per cent last year because of multiple factors, including the duties, Jalbert said.
But there still isn't enough American supply to completely replace Canadian wood, even at higher prices, and the U.S. industry couldn't ramp up to meet that demand for three to five years, he added.
"That's when I come back to the fact that market prices have to go higher to at least keep some of that Canadian supply staying into the market. So you know this is going to come to a cost of the consumer and home builders."
Irving and another major forestry company in the province are facing another challenge thanks to the Trump tariffs.
Twin Rivers Paper Company ships pulp from its Edmundston mill in a pipe across the U.S. border to its Madawaska, Maine paper mill.
The company would not comment this week on how the tariffs might affect the economics of that operation.
Irving wouldn't comment either on what the tariffs mean for the pulp it sends to the $470 million US tissue plant it opened in Macon, Ga., in 2019.
The Macon plant has already seen two expansions, the latest of which will bring employment to more than 500 people, according to a news release from the Macon area economic development authority.
Irving has a number of current job listings for the plant and would not say whether it could shift production from its New Brunswick tissue plants to Georgia to avoid the Trump tariffs.
The Holt government announced a $40 million "competitiveness and growth program" this week to help large New Brunswick companies that depend on exports, along with another $30 million to help companies diversify their markets and mitigate tariff impacts.
Gagnon said he's not sure that's enough to blunt the impact on his municipality, given how deep the industry is embedded there.
"Every part of the forestry industry, we do it here in Kedgwick, so every time there's a crisis, we're affected," he said.
ABOUT THE AUTHOR
