Good article by Jen Skeritt at Bloomberg on the impact of Trump's 31% tariff on Canadian lumber. Skeritt points out that the entire tariff has been passed on to the U.S. consumer through higher prices, and Canadian lumber producers are actually benefiting from the higher prices. The loser in this trade war has clearly been the U.S. home builders and home buyers who are paying the higher prices. The reason this has happened is because U.S. demand for Canadian lumber is strong, making the demand elasticity low. If demand elasticity were high, then Canadian producers would not be able to pass along the cost of the tariff to U.S. consumers. This is so elementary, it is taught in high school economics 101. Sad and discouraging to see our government implementing policy a high school student could see will fail ex ante. Read the full article here.
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September 2017
Michael Grove, CFACategories |