As negotiations to prevent additional U.S. tariffs progress, a recently published analysis warns about the potential consequences of the termination of the Canada-U.S.-Mexico Agreement (CUSMA), forecasting substantial job losses and significant economic repercussions for both countries.
Commissioned by the Canadian American Business Council and conducted by Oxford Economics, the report examines three potential outcomes of the ongoing trade discussions between the U.S. and Canada. These scenarios include maintaining current tariffs, the breakdown of the CUSMA agreement, and a successful renegotiation leading to improved trade relations.
If the CUSMA agreement were to collapse, the report projects job losses of 214,000 in the U.S. and 102,000 in Canada compared to the status quo. Conversely, successful renegotiation could result in job gains of 137,000 in the U.S. and 98,000 in Canada.
Beth Burke, CEO of the Canadian American Business Council, emphasized the importance of the cross-border trade relationship, stating that the findings underscore the significance of trade for both nations’ prosperity.
The report also indicates broader impacts beyond employment. In the event of a breakdown, the GDP of both countries could suffer, with estimated losses of $1.04 trillion USD for the U.S. and $271 billion CAD for Canada by 2035. Inflation rates are expected to rise in the short and long term, while real disposable income growth may be hindered, particularly in Canada.
On the U.S. side, the report highlights potential challenges in manufacturing sectors under a worst-case scenario. Industries such as auto manufacturing, wood products, and metal products could face significant setbacks, impacting states like Iowa, Michigan, Kentucky, and Alabama.
In Canada, Quebec and Ontario, prominent manufacturing hubs, are projected to be most affected by a breakdown of the CUSMA agreement, with manufacturing industries facing substantial challenges.
As the deadline approaches for potential new tariffs on various Canadian exports, negotiations are ongoing to reach a deal before the looming deadline. Trade representatives, including Canada-U.S. Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer, are working towards presenting a possible agreement to President Donald Trump in the coming days.
Burke expressed optimism about the ongoing discussions and highlighted the necessity of compromises from both sides to achieve a mutually beneficial deal.
If no agreement is reached and new tariffs are imposed, the manufacturing sector, particularly in central Canada, is expected to bear the brunt of the impact. A recent report from Oxford Economics suggests that cement, concrete, paper products, wood, computers, electronics, plastics, and rubber industries could face significant challenges.
Manufacturers heavily reliant on U.S. exports and with products that are easily substitutable are likely to face the most substantial repercussions, according to the report’s authors. Provinces like Ontario, New Brunswick, and Quebec are anticipated to be the most affected due to their reliance on these sectors, while Saskatchewan, Alberta, and Newfoundland and Labrador may experience fewer repercussions.