This is Forest to Frame, where we explore how restoring forests creates beautiful spaces. A podcast dedicated to conversations with industry leaders shaping the future of the forest industry. And now, here's your host, Russ Vaagen. Hey everybody, Russ here with another episode of Forced Frame. I wanted to talk to you about some of the new tariffs that are happening between the U.S. and Canada. And I've been doing a little research on this because it's very important to our business because there are a number of manufacturers of mass timber in Canada that sell their products into the U.S. And they also, not enough people realize this, but they also have not only unfettered access to the Canadian markets, but they're incentivized and there's lots of programs or lots of projects that are government sponsored that their manufacturers are also getting, which we don't have in the US. So, the Canadians essentially have access to almost all of our projects, unless they're specifically negotiated between company and the construction company. And it's very challenging to produce mass timber in the US and ship it to Canada. And there's certainly no one in Canada that's trying to get US product into Canada. But with the new tariff rates for August of 2025, moving to 35%, and that's what you hear. So I did a little research. And we did the USMCA, which was the United States, Mexico, and Canada Act a few years ago in the prior Trump administration, where basically negotiated a really good trade deal that is supposed to be beneficial to all parties. What I realized is that this new tariff scenario is excluded by USMCA compliant goods. It's not real clear where that's at. So I did some more research to see whether CLT and Glulam were in fact USMCA compliant or not. According to everything I've seen, they are. So this is true. Now there's no additional tariff on Glulam and CLT coming into the United States. So for you construction companies out there and others, you might think, okay, this is great, more competition. And I hope it's not true because we have been getting unfairly treated because There's been a long dispute on lumber trade between the US and Canada. And the Canadians have repeatedly been guilty in many courts of dumping lumber into the US market. So when the market's down, they've continued to pour lumber in. And there are reasons for that. They have a government that supports them and has supported them in the supply of timber. So they were getting not only inexpensive timber, but getting lots of it so they could run their mills at efficient levels in the US. The US Forest Service is almost in most areas where there are sawmills is irrelevant when it comes to the supply of timber. It wasn't always the case, but since we've moved away from managing forest aggressively to kind of a hands-off approach, we hope that's changing. There's some other things we can talk about that another time. But it's certainly not a supportive system where the US Forest Service creates a licensed area for a sawmill company to go in, manage that land, whether it's sustainable or the aesthetics or all those things that everybody agrees with may be debatable. But I mean, I think it's sustainable. I want to say that. But whether it's the way that people want it to be done is another story. But the US is not doing that and then allowing the mills to pay some sort of calculated market rate for that material. Everything is a market rate. the only thing that the US companies might have that would be below market rate would be land that they already purchased and logged, grew up, and they logged it again. That's to their benefit for buying the land. That's not as much what happens anymore because most of the company-owned timberland at the large levels have been sold off to TMOs and REITs, which make it now a even more market rate price because the return for the Timberland Investment Management Organization, TIMO, and REITs, Real Estate Investment Trusts, are calculated. They're trying to get those returns from those lands as much as possible. Now, you have this market rate, and in many cases, there's not quite as much timber as the sawmills want. If the prices come down at all, most of the landowners don't want to sell their timber. It makes it even worse for US companies, which is why they Canadian Lumber Agreement, U.S., the Softwood Lumber Agreement, the Softwood Lumber Board, all these things that have been created around Canadian and U.S. manufacturers are put in place. And right now, I just looked at the anti-dumping and countervailing duties that are put in place. Generally, they are specific to different companies, so some may have higher or lower than this. The combined duties are 35.19%. Okay, so you're probably saying, well, then what's the problem? The wood coming in is paying 35%. The duties that were put in place for non-USMCA compliant goods, 35%. Seems like that's about right. If mass timber is USMCA compliant and pays zero, and those manufacturers, they don't pay a duty within Canada. So they're getting product that's 35% less than they would if they were to sell it into the US, but they don't have to pay that duty. And in many cases in Canada, they even do that at a discount. So and half of our cost is wood. So if that's true, I mean, 35% discount on the raw material, which is the largest cost of mass timber, it's no wonder Canadian wood is beating US manufactured wood. It's just not a fair comparison. So I'm hoping that somebody sees this and, or, you know, knows who to talk to about this, because my interest here isn't to damage the industry or to damage the Canadian manufacturers, I want them to succeed as well. But, you know, it's happening with European supply coming into the US. I've had times where we've quoted things, and the price that we were shared that was quoted by a European supplier was like less than half of what we were doing it at. We were providing that at a very tight margin. So if you remove the margin, you're talking about considerably less and you're like, okay, well, you can't compete. Maybe it's your manufacturer. It's not our manufacturing because I saw the numbers that I know what the price of logs are and lumber is in Europe. It was at or below that price. What's happening there? I think that the Europeans are looking at the US market as a loss leader. It allows them to run three shifts, which means that their costs are incredibly low on manufacturing. They may be taking a loss in that product, but they're able to ship it. That's one theory that I have. The Canadians, they don't have as big a market in Canada because there's less people than the markets in the US, so they're just wanting to access the market and same with the Europeans. They're not playing on a fair playing field. And here we are in a situation where we have lots of forests that need to be restored, thinned, managed in the US. And we're struggling to do that. And we're not connecting the dots here. Mass timber right now in the construction market in general is down. But once this turns around, we're going to be growing rapidly. We need to be able to compete. And what I don't want to do is have a scenario that isn't researched and we don't have the right tariffs in place, and the market takes off. It's going to exacerbate the situation. It's going to cause less investment in infrastructure in the US. then we won't be able to compete. And that's, it's not, not fair and equitable for our US manufacturers. And I think this is something that I want to share with everybody here that we need to take a deep dive into this. And, you know, I, I want more than anything for us to figure out collectively as an industry, Canadian, US, even European, how do we grow the markets in mass timber in the places that we operate? The US being the largest, of course, but in Canada and Europe, using more wood so we can all grow. we have a down market like we have now, where there's just not as much construction going on because of interest rates and other things, the low-cost producer gets to start pushing the other producers out. I think that there's a real real risk that that's happening, especially if mass timber is USMCA compliant, has no tariff coming into the US. We need to change that. And I think that some people may be upset about that. I don't really care. I think we need to make sure that it's right. And I don't want high price mass timber. I want competitively priced mass timber. And I want everybody to be playing on a somewhat level playing field. having a raw material that's 35% less than your competitor is not on the same playing field. And I just hope that my research is inaccurate and that the tariffs are applying to cross-laminated timber and glulam beams coming into the US from Canada. And I hope there's something very similar coming from Europe. It goes the other way. It certainly needs to be applied as it comes this way. So That's my take for the forest of frame today and hope you find it interesting. Let me know what you think about this and If you have any ideas on how we should engage and change it, I'm doing my part in reaching out to people in DC and trying to get this issue elevated so people understand it. And so we can build a strong US manufacturing base for mass timber and deliver value in these beautiful buildings. 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