In his first 200 days in office, the president-elect Donald Trump will reshape the U.S. trade policy with NAFTA.
According to a memo obtained by CNN, Trump will order the Commerce Department and International Trade Commission to study the ramifications of withdrawing from NAFTA in his first day of his presidency.
The Canadians believe that Trump in the presidency would bring a higher combined tax, of 30% to 40% in range. Canada's acceptance to re-negotiate of NAFTA, plus the inclusion of softwood lumber deal into the NA trade agreement (something that was excluded in its 1994 signing due to the issue's polarizing nature), concludes that Trump is seeking to limit the amount of lumber that Canadian producers can export to the US (i.e. quota), as reported by Wood Business.
Historically, Canada’s lumber made for 1/3 of the market share for US lumber consumption. With the 2008 housing depression and growth in offshore markets, like China, the market fell and the home costs grew in the US if they were to attempt to become self-sufficient in lumber. Canada forecasts 2017 US lumber consumption to approach 52 Bfbm, noting that current US lumber capacity stands at less than 39 Bfbm or 75% of expected consumption.
As reported by Wood Business, restricting lumber imports would make the lumber prices increase and leads to a rise in log prices and, therefore, timberland values. Current sawmill economics suggest that the US South's lowest-cost regional advantage isn't going to go away anytime soon. This is evidenced by the ~ $1.5B investment in US South sawmills by Canadian companies over the last decade.
On a YTD basis, CFP shares are down 29%, WEF down 17% and WFT down 11% (CFF and IFP are up 28% and 3%, respectively) vs. the S&P TSX Composite up 9% over the same period. Canadians are confident for a significant recovery in the lumber sector.
