Retaliatory Tariffs Hit Lumber
Frank Stewart || Executive Director || W. Virginia Forestry Assoc || May 22, 2019
Retaliatory tariffs from China have been a buzzsaw through Appalachian hardwood businesses and the families that own and operate them.
The hardwood industry provides an estimated $60 billion economic impact in the 12-state region, but that will change this year because of trade with China. Exports make up approximately 50% of the high value hardwood lumber sold, and THE top market for species like red oak is China.
The oaks are more than 35% of the eastern hardwood forest and have dominated American furniture, cabinet and flooring production. U.S. consumers were tiring of red oak in the mid-1990s, just when manufacturing exploded in China.
The timing was good as Chinese consumers sought the “western” look of red oak, and Appalachian producers sought new markets. Red oak exports to China increased for 18 straight years, according to the U.S. Department of Agriculture. In 2018, more than half of all higher value American Red Oak boards were shipped to China.
The volume of lumber sales to China have been slashed in 2019 with first the threat of tariffs and then the actual retaliation. President Trump announced tariffs on China in mid-2018, and retaliation threats hit the hardwood industry. The price of red oak lumber fell 25% from June to August 2018 as anxious buyers worried about tariffs.
The third round of retaliation in September 2018 placed a 10- percent tariff on red oak and other species from the U.S. With falling prices, and now a tariff, red oak quickly became a loss leader for sawmills. The No. 1 market for the No. 1 species of American hardwood lumber was being sold below cost — if it sold at all.
Sawmill owners looked for alternative markets in Vietnam, Indonesia and Europe. There is no other market to absorb 32,025 shipping containers of American Red Oak that sold to China in 2017. The tariffs have taken all profits from U.S. hardwood exports to China. It will drive mills out of business this year, losing jobs and outlets for landowners to sell their timber.
Free and fair trade is critical to the long-term growth and health of our industry. We understand China engages in unfair trade preventing U.S. companies from competing on a level playing field, but the Trump administration should negotiate solutions to our long-standing issues with China and settle this dispute quickly.
Forest landowners and workers in the hardwood industry benefit when products flow freely across all borders.