Nothing happens in a vacuum, and nowhere is this evident than in the residential construction business, where, it seems, everything connects.
For example, is it only us who sense an ironic sting to the fact that tax code overhaul aimed at putting more money into corporate and individual household coffers comes so hard on the heels of lawmakers shifting policy to take money out of those very same coffers?
Here is a clear, classic case of policy sleight of hand whose intent and consequence rank protectionism over prosperity.
National Association of Home Builders economist Paul Emrath deconstructs a direct ripple series of consequences resulting from newly legislated duties of roughly 21% on Canadian lumber shipping into the U.S., first on costs down to the board foot. Emrath flows analysis through to increased prices builders pay for Canadian softwood, and finally domino-ing as effects on overall spending, tax revenue creation, and net macroeconomic impact.
What may come as a near-term win for a finite number of U.S.-based softwood lumber producers could actually come back around to haunt them. Emrath writes:
The impacts of these duties on the U.S. economy next year will include increased production by U.S. sawmills, reduced imports from Canada, and higher prices paid for lumber by consumers in the U.S., which in turn will lead to a reduced volume of new residential construction. The National Association of Home Builders (NAHB) estimates that the bottom line impact of these effects in 2018 will be a net loss of
- $576.9 million in wages and salaries for U.S. workers,
- $404.0 million in taxes and other revenue for governments in the U.S., and
- 9,370 full-time U.S. jobs.
Now, explain how those 9,370 U.S. laborers–out of work due to trade policy changes that aimed to protect the interests of U.S.-based sawmill producers–are supposed to feel about the “biggest tax cut ever” for American workers.
Here’s the logic, flowing through 2018 projection models, for how new tariffs on Canadian softwood lumber will flow into residential construction. Emrath explains that the new duty will likely effect a 1.3 billion foot reduction in Canadian imports, which would result in an 885 board foot windfall opportunity for U.S. lumber producers, and an almost 7% spike in what builders would pay for lumber, period:
- $1,360 increase in the price of an average single-family home
- $478 increase in the market value of an average multifamily home
- $1.1 billion reduction in investment in single-family structures, and
- $147 million reduction in investment in multifamily structures.
Now, a $1.1 billion reduction in an over $200 billion business is just about half-of-one percent, but for what gain?
Imagine these same protectionist trade policies carrying across into goods, materials, and sub-parts the U.S. imports not only from Canada but from places around the world. Americans will see less access to those goods, and higher prices for items they’re accustomed to have a variety of options for as well as a number of price points.
Everything connects. America first can potentially hurt Americans most.
