In case you haven’t heard, a new slew of timber tariffs is dropping. Earlier this week, the U.S. imposed a 10% duty on softwood lumber imports. These new timber tariffs have an impact on several resource stocks.
Let’s dig in and answer the obvious questions about this development.
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What this change means
First and perhaps most importantly, these new tariffs tack on to an already high existing tariff of 35% on Canadian lumber exports. This brings the total tariff figure to a staggering 45%.
That’s going to drive up export costs to the U.S. market. It makes Canadian lumber less competitive than its U.S. peers, as well as other countries that may not have a tariff imposed.
This, in turn, will squeeze the forestry industry. Specifically, I’m referring to West Fraser Timber (TSX: WFG) and Stella-Jones (TSX: SJ).
Both stocks have products and materials involved in cross-border trade. West Fraser is one of the largest and most diversified lumber producers, with both lumber manufacturing and engineered wood products.
Turning to Stella-Jones, the company is known for producing utility poles as well as wood and lumber products used in construction.
Those tariffs could also threaten jobs in forest-dependent communities as production cutbacks take their toll.
Finally, these tariffs will add to the growing volatility and uncertainty in the Canadian resource market.
That timber tariff pain could spread to other markets
The damage from tariffs isn’t limited to Canada. The U.S. market, specifically the construction and housing market, could see downward pressure as material prices surge. It could also spread to adjacent industries, which could be significant given Canada’s resource-rich landscape.
In short, the new tariffs represent a major headwind for Canadian resource stocks like West Fraser and Stella-Jones and their U.S. markets served.
