Brushpiles: Retaliatory Chinese Tariffs Push the Hardwood Industry into Economic Stress

The Pennsylvania Forestry Association notes that the hardwood supply chain from the forest owners to the loggers to the primary manufacturers (sawmills) to the secondary manufacturers (cabinets, furniture, etc.) continues to be under severe financial duress due to the imposition of Chinese tariffs on hardwood products. These Chinese tariffs are in direct retaliation to the Trump administration-imposed tariffs on imported Chinese products.

One major lumber company that operates in eight PA and NY locations reports its revenues are down 20-25% over last year. Salaried workers at the company have been required to take three unpaid furlough days each month since July. And the company has temporarily stopped its matching contributions to the employee 401K retirement program. Production has been cut by about 15% as sales have dropped to the company's largest customers in China. As sales and production declined at the company, so has income for independent loggers, truckers, forestry consultants, equipment manufacturers, machine shops, and other companies that serve as contractors. For forest owners it means less cash flow from the woodlots that they rely on for income.

All told, the US hardwood industry exports about $2.2 billion a year in lumber to China. According to the American Hardwood Export Council, American hardwood sales to China plummeted by $615 million, a drop of 39%, since the Chinese imposed the retaliatory tariffs. According to Mike Snow, the Council's Executive Director, of the 200 member companies, five or six have shut down, "and a couple of bigger ones are teetering. It's really hard to overstate the damage on the industry. The US market share in China has been cut almost in half as Chinese buyers look to other countries for their hardwood lumber. At the same time, Russia and the African nation of Gabon (known for its rainforest) have doubled their sales to China."

In July, 38 House Democrat and Republican members from hardwood-producing states asked President Trump to make the industry eligible for the same kind of trade assistance relief that the federal government has already given to soybean farmers hurt by the trade war. However, Trump suggested in a recent tweet that business owners suffering losses from the tariffs had nobody to blame but themselves "for bad management." Snow noted the Trump administration's position is surprising because the largest hardwood producing states include Pennsylvania and West Virginia, two states that helped deliver his presidency. "Most of the hardwood is located in what you would call Trump territory," Snow said. "And we're hearing anecdotally from our members that people in that area regret their vote." Trump defended the need for the tariffs as the US imposed a new 15% levy on about $112 billion in Chinese imports, including food, clothing, and other consumer goods. A second round of $160 billion in US tariffs due to begin December 15 will mean that 96.8% of all products shipped from China to the United States will be taxed.

Last but not least, this information from a major PFA Member Lumber Company manager: "We would not be in the position that we are in right now were it not for the tariffs. As you well know as these prices for lumber have plummeted, the bottom line is that landowners will end up getting much less for their timber."

All Pennsylvania forest owners should be very concerned about this tariff war and its impact on the value of your timber. History has shown that nobody wins in tariff wars. Please let Senator Toomey, Senator Casey, and your elected US Representative know how this issue is impacting you.