Thinking Ahead: What a Biden Presidency May Look Like for the Pallet and Lumber Industries

Joe Biden has officially become the 46th President of the United States, and questions are swirling around the country about the implications for the economy, foreign trade, American households and the direction of the country.

No matter who you voted for, there are going to be things you probably will like and some you will dislike about the next administration. 

This is meant to be a quick dive into the possible implications for the pallet and lumber sectors. My basic assumption is that the Biden administration will likely be a mixed bag. Some policies will help. Others may hurt small businesses, especially the forest products sector. The following information is based on published reports, Biden administration statements and expert predictions.

Let’s start where the Biden administration may help the industry. The first area that stands out is the trade war with China. Biden is expected to take a more open and collaborative tone toward foreign trade, especially with China. Trump, on the other hand, instituted a very combative approach, which led to tariffs and trade restrictions on both sides. One of the sectors caught in the crossfire of Trump’s China clash has been the U.S. hardwood industry. U.S. hardwood sales slumped due to tariffs, reduction in Chinese orders and changes in buying practices in the Chinese construction market. Biden may be able to reverse some of these impediments to greater hardwood exports. However, others reflect larger macroeconomic changes in China, such as slowing economic growth and new approaches to housing and furnishing new construction.

Michael Snow, executive director of the American Hardwood Export Council, said to the Pallet Enterprise, “There are growing concerns of a housing bubble, and there have been threats of price caps on housing. To keep delivered home prices in check, we are seeing developers finish new construction as inexpensively as possible. Essentially, we’re seeing a race to the bottom. Builders and developers are turning to vinyl floors, particle board doors, and other non-wood materials in order to keep costs down.”

Biden will likely ease restrictions and enforcement at the U.S. border. This could lead to more migrant labor coming into the country, which could ease some staffing burdens. But don’t expect a miracle here. Government efforts to continue unemployment assistance at elevated levels will still keep many possible workers on the sidelines. Seeking to boost worker pay, Biden has also signaled his support to move the federal minimum wage to $15 per hour. This would put upward pressure on all industries, especially ones like the pallet and lumber sectors that already pay well above minimum wages to attract workers.

In addition, President Biden wants to enact mandatory paid family and medical leave for up to 12 weeks. He also wants to re-examine how companies classify independent contractors compared to employees. Biden also supports the Paycheck Fairness Act, which would require employers to demonstrate the reason for disparities in pay between men and women. All of these moves will put extreme upward pressure on wages, which could further push a move toward automation.

Continuing to champion support for Obamacare, Joe Biden wants to make it available to all. He would allow Medicare to negotiate prescription drug prices and would permit importation of lower-cost drugs. Geoff Colvin wrote in Fortune, “The U.S. health care industry — America’s largest industry, accounting for 18% of the entire economy — generally hates those proposals, fearing they’d decimate or demolish wide swaths of the sector.”

Biden has proposed some major new government programs. Those all come with some eye-popping price tags. One way he hopes to pay for them is by raising corporate tax rates and undoing the Trump tax cuts. One of his priorities in office is to raise the corporate tax rate from 21% to 28%, which is still lower than the 35% rate before the Trump tax cuts were enacted. Biden has also proposed doubling the tax rate on foreign profits while encouraging companies to re-shore operations by offering tax incentives. His tax plans could reduce the Sec. 179 “expense” deduction, increase capital gains tax rates and reduce the 199A deduction for “pass-through” entities. He has said that he wants to raise the income tax on people making more than $400,000 per year and tax capital gains as ordinary income on income over $1 million.

When it comes to workplace safety, President-elect Joe Biden is expected to ask the Occupational Health and Safety Administration (OSHA) to issue emergency rules on COVID safety for workers. This was something the Trump administration was not willing to do although OSHA did release safety best practice and general guidelines.

Joe Biden stated, “In the midst of a global pandemic, OSHA has been prevented from using its full range of tools to protect workers from COVID-19…. I will direct OSHA to enforce worker safety requirements, target the worst violators, and work to increase the number of OSHA inspectors to get the job done.”

This suggests that Biden will push for more regulations and stricter enforcement of social distancing, cleaning practices, and wearing of Personal Protective Equipment (PPE).

Environmental policy will focus on fighting climate change through incentives to switch to carbon-free sources of energy for automobiles and improving energy efficiency for buildings.

Chris Matthews of MarketWatch reported, “Biden’s goal is to make the power-generation industry produce net-zero emissions by 2035 and for the entire U.S. economy to produce net-zero emissions by 2050, in line with United Nations estimates of what’s needed to stave off the worst effects of climate change… Biden also said he would push to cut subsidies in the tax code for fossil fuel companies and ban fracking on federal, but not private, land.”

These proposals could put a huge stranglehold on the U.S. energy sector, which has enjoyed a revival under President Trump. If a big part of your customer base is in oil and gas, take note. A serious reduction in the energy sector could also hurt demand for board roads and crane mats.

Finally, President-elect Biden recently unveiled his $1.9 trillion economic rescue package. It comes with more goodies for lots of constituencies. Tami Luhby and Katie Lobosco of CNN wrote, “Billed as the American Rescue Plan, the package augments many of the measures in Congress’ historic $3 trillion coronavirus relief bill from March and in the $900 billion legislation from December, which was scaled back to garner support from Senate Republicans.”

On top of checks already sent to Americans, Biden’s plan would send out  additional stimulus checks. It would also boost the federal enhancement to the jobless benefit from $300 to $400 per week. The relief bill passed in December only extended these benefits through March. Biden wants to extend them through December. This could continue to sideline many potential workers who can earn a decent wage by staying home.

CNN reported, “The plan would reinstate the paid sick and family leave benefits that expired at the end of December until September 30. It would extend the benefit to workers employed at businesses with more than 500 employees and less than 50, as well as federal workers who were excluded from the original program.

There is a small provision to create a new grant program for small business owners; this would be separate from the very popular Paycheck Protection Program.

So, what does all of this mean for small businesses and our industry? If Biden gets his way, it will lead to more regulations, higher taxes, more handouts and less trade tensions. The Biden administration will seek to use the tax code to support green projects while taxing the rich even more. Now is the time to sit down with your tax professionals to see how some of these developments could impact you. Things are changing, and you need to be ready. 

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Chaille Brindley

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Pallet Enterprise November 2024