How Canada could use lumber as a winning weapon in a U.S. trade war

While both sides are likely to lose a trade war, Canada would score a win over the U.S. by leveraging the country’s lumber assets, according to one prominent economist.

Jens Peter Barynin, chief economist at Vivi Economics, told BNN Bloomberg that Canada can and should use lumber as a potent weapon to strike back against any import tariffs, possibly by putting export taxes on lumber.

That’s because despite U.S. President Donald Trump’s claims that the U.S. “doesn’t need” anything Canada produces, that’s very much not the case in lumber, where Canada produces about 25 per cent of the U.S. demand.

Theoretically, the U.S. has enough trees to meet their domestic demand “but if you really wanted to do that you would be unlocking state-owned forest in Washington, Oregon and Idaho which is going to be met with fierce resistance… and could be in conflict with the EPA,” he said in a Friday interview.

Even if those hurdles were passed, the U.S. does not have enough milling capacity to process and ship all that new timber.

Barynin said Canadian policymakers should feel confident that even if they were to implement an export tax that doubled the current price of lumber, the U.S. market would still buy it. He notes the example of the pandemic, when prices rose by 400 per cent but demand stayed strong to supply a busy housing construction market.

“If we put a tax of double the price in the past month, they’ll still pay it,” he said.

Barynin says counter to what Trump alleges, the current free trade deal between Canada and the U.S. has been “a really good deal for them so if you want to upset that, we have things we can push back. We shouldn’t be on our heels.”

Instead of winners and losers, overall this trade trade will bring more losers than winners on both sides. “Free trade was the win-win and we were there already,” he said.

“What we are talking about is… aggressively making the pain as bad as it can be for the U.S. from a trade perspective. They’re doing that to us too, that’s what a trade war is.”