As negotiations to prevent additional U.S. tariffs progress, a recent study cautions about the potential repercussions if the Canada-U.S.-Mexico Agreement collapses, forecasting significant job losses and economic consequences on both sides of the border. The analysis, commissioned by the Canadian American Business Council and conducted by Oxford Economics, evaluates three potential outcomes of the trade discussions between the U.S. and Canada.
The scenarios considered encompass the maintenance of current tariffs, a scenario where the CUSMA agreement disintegrates, and a scenario where CUSMA is successfully revised, leading to an enhanced trade relationship. Should CUSMA terminate, an estimated 214,000 jobs in the U.S. and 102,000 jobs in Canada would be at risk compared to the status quo. Conversely, successful renegotiation of CUSMA could result in job gains of 137,000 in the U.S. and 98,000 in Canada.
The CEO of the Canadian American Business Council, Beth Burke, emphasized the significance of the trade partnership between the U.S. and Canada for the prosperity of both nations. The potential consequences extend beyond employment figures, with the breakdown scenario anticipated to impact the GDP of both countries, projecting a $1.04 trillion loss for the U.S. economy and a $271 billion decline for Canada by 2035. Inflation rates are expected to rise in the short and long term in both countries if the agreement fails, while real disposable income growth would be hindered, particularly in Canada.
In the worst-case scenario outlined in the report, manufacturing sectors in the U.S., including auto, wood product, and metal product manufacturing, would face significant challenges, impacting states like Iowa, Michigan, Kentucky, and Alabama. Similarly, manufacturing hubs in Quebec and Ontario would bear the brunt in Canada if CUSMA collapses.
With an impending deadline for new 50% tariffs on Canadian goods, efforts are ongoing to reach a resolution before the deadline. Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer are actively engaged in discussions to present a potential trade deal to President Donald Trump. Concessions from both sides may be necessary to secure an agreement.
In case negotiations fail and new tariffs are imposed, manufacturing sectors in central Canada are expected to be most heavily affected. A separate report from Oxford Economics highlights that cement, concrete, paper products, wood, computers, electronics, plastics, and rubber manufacturers would face substantial impacts. Provinces like Ontario, New Brunswick, and Quebec are likely to be most affected due to their reliance on these industries, while provinces like Saskatchewan, Alberta, and Newfoundland and Labrador may fare better.