Canada and the United States had a prolonged dispute about alleged government subsidies to the softwood lumber industry in Canada. Who loses and who gains from the situation in which Canadian governments impose taxes on Canadian exports of softwood lumber to the United States?

Question

Quizplus · Accepted Answer

When Canadian governments impose taxes on Canadian exports of softwood lumber to the United States, the cost of the lumber increases for U.S. users of lumber, which leads to a decrease in demand for lumber. This causes U.S. producers of lumber to lose out on potential sales and profits. However, Canadian producers of lumber benefit from the taxes as they are able to charge higher prices for the lumber they sell domestically. Canadian users of lumber may also lose out as the higher prices for domestically produced lumber may lead to a decrease in demand, resulting in less competitive pricing.

Canada and the United States Had a Prolonged Dispute About