Consumer Sector Update for 04/25/2017: WFT.TO, SJ.TO, ADN.TO, CFF.TO

Canadian lumber stocks such was West Fraser (WFT.TO, lost near 3% yesterday), Stella Jones (SJ.TO, little changed), Acadian (ADN.TO, lost 1.6%) and Conifex (CFF.TO, lost 2%) may come under pressure Tuesday after the U.S. Trump Administration slapped anti-subsidies duties on Canadian softwood. Also, the U.S. is expected to introduce anti-dumping duties on Canadian lumber later this summer which could take the combined tariffs to around 40%.

The lumber industry had been expecting tariffs for months, but it just didn't know how high they would be. Now the industry knows the first part. The initial tariffs will average 20%, with WFT facing the highest tariffs at 24%. The lowest tariff is near 3%.

According to reports, Canada has about 24,000 jobs depending solely on the U.S. export market and most Canadian provinces will be impacted. Canada has said it will take the dispute to the WTO or NAFTA Trade Tribunal.

National Bank of Canada (NA.TO) has published a note that asks: just how significant is the latest development in the long-running U.S. and Canada softwood lumber dispute? It said while the import duty of as much as 24% imposed by the U.S. will hit the forestry industry on the chin, the overall impact on Canada's economy is likely to be limited. It noted that Canada exported less than US$6 billion worth of lumber to the U.S. last year, accounting for just 1.2% of total exports. In other words, it said, even if lumber exports to the U.S. dives to zero -- which has never occurred in the three decades of lumber-related trade disputes between the U.S. and Canada --, the net impact on Canada's GDP would be less than half a percentage point.

National noted British Columbia and New Brunswick stand to lose the most from the U.S. import duty, although it's worth noting that forestry, logging and sawmill activity account for less than 2% of GDP in both provinces.

National asked: How about the impact on the labour market? At the end of last year there were less than fifty thousand jobs left in forestry, logging and support activities, or less than 0.3% of total employment in Canada. So, it asked, why even bother talking about the U.S. import duty? While not significant in itself, this latest chapter in the softwood lumber dispute could give clues about how hard-line the Trump administration aims to be when renegotiating NAFTA, National said.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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