Customs (Tariff)

High Lumber Prices Add Urgency to a Decades-Old Trade Fight

In 2016, toward the end of the Obama administration, the American lumber industry petitioned the government to impose duties on Canadian softwood lumber imports in response to what it contended were unfair trade practices. The proceedings continued under the Trump administration, which in 2017 imposed duties of 20.2 percent for most Canadian producers. The rate was lowered to 9 percent last year.

The status of the long-running dispute took on a new urgency as the price of lumber soared over the past year. The National Association of Home Builders estimated in April that higher lumber costs had added nearly $36,000 to the price of an average newly constructed single-family home. A benchmark for the price of framing lumber set a record high of $1,515 per thousand board feet in May, four times the price at the beginning of 2020, before beginning to plummet. Last week, the price stood at $930, still more than double its level at the start of 2020, according to Fastmarkets Random Lengths, the trade publication that publishes the benchmark.

“As an economist, it is very hard to understand why we’re taxing something we don’t produce enough of,” said Robert Dietz, the chief economist for the National Association of Home Builders.

On the other side of the issue are U.S. lumber producers. The U.S. Lumber Coalition, an industry group, has argued that strong demand, not duties, is driving lumber prices and that the duties make up only a small portion of the total cost of lumber for new homes.

The coalition credits the duties with strengthening the U.S. lumber industry, saying in a statement that American sawmills had expanded capacity in recent years, producing an additional 11 billion board feet of lumber since 2016. “More lumber being manufactured in America to meet domestic demand is a direct result of the trade enforcement, and the U.S. industry strongly urges the administration to continue this enforcement,” the coalition said.

Dustin Jalbert, a senior economist at Fastmarkets, a price reporting firm, attributed the chaotic lumber market and high prices in large part to effects from the pandemic. At the start of the pandemic, he said, sawmills “assumed the worst” and curbed production, only for the housing market to rebound and for demand to soar.

Mr. Jalbert said the duties stemming from the U.S.-Canada dispute were not a major reason for the high prices. “In terms of the short-term pricing situation, it’s lower down the list in terms of the factors that are driving the record prices that we’ve seen in the market,” he said.

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Steel Price Surge Revives U.S. Industry

For decades, the story of American steel had been one of job losses, mill closures and the bruising effects of foreign competition. But now, the industry is experiencing a comeback that few would have predicted even months ago.

Steel prices are at record highs and demand is surging, as businesses step up production amid an easing of pandemic restrictions. Steel makers have consolidated in the past year, allowing them to exert more control over supply. Tariffs on foreign steel imposed by the Trump administration have kept cheaper imports out. And steel companies are hiring again.

Evidence of the boom can even be found on Wall Street: Nucor, the country’s biggest steel producer, is this year’s top performing stock in the S&P 500, and shares of steel makers are generating some of the best returns in the index.

“We are running 24/7 everywhere,” said Lourenco Goncalves, the chief executive of Cleveland-Cliffs, an Ohio-based steel producer that reported a significant surge in sales during its latest quarter. “Shifts that were not being used, we are using,” Mr. Goncalves said in an interview. “That’s why we’re hiring.”

has fallen more than 75 percent. More than 400,000 jobs disappeared as foreign competition grew and as the industry shifted toward production processes that required fewer workers. But the price surge is delivering some optimism to steel towns across the country, especially after job losses during the pandemic pushed American steel employment to the lowest level on record.

“Last year we were laying off,” said Pete Trinidad, president of the United Steelworkers Local 6787 union, which represents roughly 3,300 workers at a Cleveland-Cliffs steel mill in Burns Harbor, Ind. “Everybody was offered jobs back. And we’re hiring now. So, yes, it’s a 180-degree turn.”

broader tariffs on imported steel in 2018. Steel imports have collapsed by roughly a quarter, compared with 2017 levels, according to Goldman Sachs, opening up an opportunity for domestic producers, who are capturing prices as much as $600 per ton above those prevailing on the global markets.

Those tariffs have been eased somewhat by one-off agreements with trade partners like Mexico and Canada, and by exemptions granted to companies. But the tariffs are in place and continue to be applied to imports from key competitors in the European Union and China.

steel and aluminum imports that had played a major role in the Trump administration’s trade wars.

It is unclear whether the talks will lead to any significant breakthroughs. They could, however, make for difficult politics for the White House. On Wednesday, a coalition of steel industry groups including steel manufacturing trade groups and the United Steelworkers union — whose leadership endorsed President Biden in the 2020 election — called on the Biden administration to ensure that tariffs remain in place.

“Eliminating the steel tariffs now would undermine the viability of our industry,” they wrote in a letter addressed to the president.

Adam Hodge, a spokesman for the Office of the United States Trade Representative, which announced the trade talks, said the discussions were focused on “effective solutions that address global steel and aluminum overcapacity by China and other countries while ensuring the long-term viability of our steel and aluminum industries.”

Although producers are rejoicing, the price increases are painful for consumers of steel.

At its Plymouth, Mich., plant, Clips & Clamps Industries employs roughly 50 workers who stamp and form steel into components for cars such as the metal props that are used to keep the hood open when checking the oil.

“Last month, I can tell you, we lost money,” said Jeffrey Aznavorian, the manufacturer’s president. He attributed the loss, in part, to higher prices the company had to pay for steel. Mr. Aznavorian said he worried that his company would lose ground to foreign auto parts suppliers in Mexico and Canada who can buy cheaper steel and offer lower prices.

And it does not look like things are going to get easier for steel buyers any time soon. Wall Street analysts recently lifted forecasts for U.S. steel prices, citing the combination of industry consolidation and the durability, at least so far, of Trump-era tariffs under Mr. Biden. The two have helped create what analysts from Citibank called “the best backdrop for steel in a decade.”

Leon Topalian, the chief executive of Nucor, said the economy was showing an ability to absorb high steel prices, which reflect the high-demand nature of the recovery from the pandemic. “When Nucor is doing well, our customer segment is doing well,” Mr. Topalian said, “which means their customers are doing well.”

For their part, steel workers are enjoying a respite after being hit hard by the pandemic.

The city of Middletown in southwestern Ohio was spared the worst of the downturn, which saw 7,000 iron and steel production jobs disappear nationwide. Middletown Works — a sprawling Cleveland-Cliffs steel plant and one of the area’s most important employers — managed to avoid layoffs. But as demand has surged, activity and hours at the plant are picking up.

“We’re definitely running good,” said Neil Douglas, president of the International Association of Machinists and Aerospace Workers Local Lodge 1943, which represents more than 1,800 workers at Middletown Works. The plant, Mr. Douglas said, is having trouble finding the additional workers to hire for positions that could earn as much as $85,000 a year.

And the buzz at the plant is spilling over into the town. Mr. Douglas says he can’t walk into the home improvement center without running into someone from the mill who is embarking on a new project at home.

“You can definitely feel in the town that people are using their disposable income,” he said. “When we’re running good and we’re making money, people are going to spend it in town for sure.”

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U.S. and Europe to Begin Talks on Steel and Aluminum Tariffs

Many of the European tariffs targeted the constituencies of powerful Republicans. The duties on whiskey hit makers of bourbon in Kentucky, home of Mitch McConnell, the Senate minority leader. The planned increases would have raised the tariff on whiskey to 50 percent, forcing many small producers out of the European market, according to the Distilled Spirits Council, an industry group.

“Distillers across the United States are breathing a huge sigh of relief,” Chris Swonger, the council’s president, said in a statement. “We greatly appreciate the Biden administration’s ongoing efforts to resolve these longstanding trade disputes and reduce the economic pain felt by those industries unfairly caught in the middle.”

The association that represents U.S. steel makers was more restrained, emphasizing that the talks should focus on the problem of subsidies that encourage companies to produce more steel than the market can absorb, pushing down prices.

“While China is the single largest source of global steel oversupply, subsidies and other market distorting policies in many countries are contributing to the overcapacity crisis,” Kevin Dempsey, president of the American Iron and Steel Institute, said in a statement. “Injurious surges in imports have come from every region of the world.”

The announcement Monday was the most recent sign of gradual improvement in trade relations since Mr. Biden took office, and comes ahead of a planned visit by the president to Europe in June.

In March, the United States and the European Union temporarily suspended tariffs on billions of dollars of each others’ aircraft, wine, food and other products as they worked to settle a long-running dispute involving Boeing and Airbus, the two leading airplane manufacturers. The United States also temporarily suspended retaliatory tariffs against British products like Scotch whisky that had been imposed as part of the dispute over aircraft subsidies.

Trade officials will discuss how to address a global supply glut that poses “a serious threat to the market-oriented E.U. and U.S. steel and aluminum industries and the workers in those industries,” Katherine Tai, the U.S. trade representative; Gina M. Raimondo, the secretary of commerce; and Mr. Dombrovskis said in a joint statement Monday.

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How Brexit Ruined Easter for Britain’s Chocolate Makers

“We’d been told the product would arrive in France, so we put Calais as the point of entry. It went to Rotterdam, where it sat for six weeks,” he said. “Chocolate. Sitting in a warehouse. For six weeks.”

Through a shipping agent, he managed to get the import duty dropped. He learned a lesson about filling out forms, but that expertise won’t help him much.

“It’s impossible to find shippers that will deliver to Europe,” he said, “because there’s a backlog of goods in the pipeline.”

At Coco Caravan, a chocolate maker in the Cotswolds, the stasis has meant that Europe has gone from 15 percent of the company’s revenue to zero. That has caused Jacques Cop, the owner, to disappoint old customers and put off new ones. In recent months, prospective buyers in the Netherlands, France and Germany have expressed interest.

“They say, ‘We found you online and love everything you do in terms of being ethically sourced and vegan, but how are you going to combat the import-export problem we will have with the European Union?’” said Mr. Cop. “We can’t give them a clear answer, other than, ‘Yes, there will be additional costs involved.’”

Mr. Cop is also confronting a challenge common among small chocolate makers in Britain: importing raw ingredients from Europe. He stockpiled cacao in 2020 from his source of choice in Amsterdam. Now that it is time to buy more, obstacles have emerged. Transportation costs have doubled, which is bad enough. But Mr. Cop says his shipper refuses to take new orders because of worries that a shipment will somehow get blocked between Amsterdam and Britain.

“It’s to the point where I’m thinking of borrowing a Renault van and just driving to the Netherlands myself,” Mr. Cop said. “It’s a 10-hour drive each way. But I’m not sure I have another choice.”

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In Washington, ‘Free Trade’ Is No Longer Gospel

Like Ms. Tai and Mr. Lighthizer, many past presidents and trade officials emphasized fair trade and the idea of holding foreign countries accountable for breaking trade rules. But many also paid homage to the conventional wisdom that free trade itself was a worthy goal because it could help lift the economic fortunes of all countries and enhance global stability by linking economies.

That idea reached the height of its popularity under the presidencies of George H.W. Bush, Bill Clinton and George W. Bush, where the United States negotiated the North American Free Trade Agreement, led the talks that gave the World Trade Organization its modern format, granted China permanent normal trading relations, and sealed a series of trade agreements with countries in Latin America, Africa and the Middle East.

President Barack Obama initially put less emphasis on free trade deals, instead focusing on the financial crisis and the Affordable Care Act. But in his second term, his administration pushed to sign the Trans-Pacific Partnership, which came under criticism from progressive Democrats for exposing American workers to foreign competition. The deal never won sufficient support in Congress.

For Democrats, the downfall of that deal was a turning point, propelling them toward their new consensus on trade. Some, like Dani Rodrik, a professor of political economy at Harvard, argue that recent trade deals have largely not been about cutting tariffs or trade barriers at all, and instead were focused on locking in advantages for pharmaceutical companies and international banks.

David Autor, an economist at the Massachusetts Institute of Technology, said economic theory had never claimed that trade made everybody better off — it had said trade would raise overall economic output, but lead to gains and losses for different groups.

But economists and politicians alike underestimated how jarring some of those losses could be. Mr. Autor’s influential research shows that expanded trade with China led to the loss of 2.4 million American jobs between 1999 and 2011. China’s growing dominance of a variety of global industries, often accomplished through hefty government subsidies, also weakened the argument that the United States could succeed through free markets alone.

Today, “people are much more sensitive to the idea that trade can have very, very disruptive effects,” Mr. Autor said. “There’s no amount of everyday low prices at Walmart that is going to make up for unemployment.”

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U.S. and Europe Will Suspend Tariffs on Alcohol, Food and Airplanes

The United States and European Union agreed to temporarily suspend tariffs levied on billions of dollars of each others’ aircraft, wine, food and other products as both sides try to find a negotiated settlement to a long-running dispute over the two leading airplane manufacturers.

President Biden and Ursula von der Leyen, the president of the European Commission, agreed in a phone call on Friday to suspend all tariffs imposed in the dispute over subsidies given to Boeing and Airbus for “an initial period of four months,” Ms. von der Leyen said in a statement.

“This is excellent news for businesses and industries on both sides of the Atlantic and a very positive signal for our economic cooperation in the years to come,” she said.

In a statement, the White House said Mr. Biden had “underscored his support for the European Union and his commitment to repair and revitalize the U.S.-E.U. partnership.”

had authorized both the United States and Europe to impose tariffs on each other as part of two parallel disputes, which began almost two decades ago, over subsidies the governments have given to Airbus and Boeing. The E.U. had imposed tariffs on roughly $4 billion of American products, while the United States levied tariffs on $7.5 billion of European goods.

The aircraft dispute is an early test of the Biden administration’s ability to rebuild America’s relationship with Europe, which U.S. officials see as crucial for accomplishing other trade and foreign policy goals.

Former President Donald J. Trump took a more adversarial and aggressive stance toward the bloc. He accused it of cheating the United States on trade and imposed tariffs on European metals, aircraft and other products. He also threatened further tariffs against European automakers.

The Biden administration has said it would restore ties with the E.U., formerly a close ally, as it seeks to form coalitions to take on bigger global problems, like China’s unfair trade practices. And it has committed to pressing Europe for a settlement on the aircraft dispute, as well as other continuing trade spats over metals, digital service taxes and other issues.

temporarily suspend tariffs levied against the United Kingdom, including on Scotch whisky, as part of the dispute for a period of four months.

Monika Pronczuk and Liz Alderman contributed reporting.

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