A recent report has highlighted the potential negative consequences of the Canada-U.S.-Mexico Agreement (CUSMA) collapsing during ongoing trade discussions, emphasizing significant job losses and economic ramifications for both countries. The analysis, conducted by Oxford Economics for the Canadian American Business Council, examined three possible outcomes of the trade talks between the U.S. and Canada: maintaining current tariffs, CUSMA dissolution, or successful renegotiation leading to improved trade relations.
In the event of CUSMA termination, an estimated 214,000 American and 102,000 Canadian jobs would be at risk compared to the status quo scenario. Conversely, successful renegotiation 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, stressed the significance of the U.S.-Canada trading relationship for both nations’ prosperity.
The report also forecasts substantial GDP impacts in case of a breakdown, 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, and real disposable income growth would be hindered, particularly in Canada. Conversely, successful negotiations indicate increased disposable income, lower inflation, and significant GDP growth for both countries.
Manufacturing sectors in the U.S., such as auto, wood products, and metal manufacturing, would suffer most in a worst-case scenario, affecting states like Iowa, Michigan, Kentucky, and Alabama. If CUSMA were to fail, Quebec and Ontario in Canada would face the brunt of manufacturing losses domestically.
As the deadline nears for potential new tariffs on Canadian exports, officials are actively engaging in negotiations to avert such measures. Trade Minister Dominic LeBlanc’s ongoing discussions with U.S. Trade Representative Jamieson Greer aim to present a trade deal to President Donald Trump before the tariff deadline. Concessions are expected from both sides to reach a mutually beneficial agreement.
Failure to reach a deal could result in substantial impacts on manufacturers in central Canada, with sectors like cement, paper products, wood, computers, electronics, plastics, and rubber facing the most significant challenges. Provinces like Ontario, New Brunswick, and Quebec are predicted to bear the brunt of the new tariffs due to their reliance on these manufacturing industries.