A recent analysis warns of severe consequences if the Canada-U.S.-Mexico Agreement collapses during ongoing trade negotiations to avoid additional U.S. tariffs. The report, conducted by Oxford Economics for the Canadian American Business Council and published on Monday, evaluates the potential outcomes of the trade talks between the U.S. and Canada.
The study examines three scenarios: maintaining existing tariffs, the breakdown of the CUSMA agreement, and a successful renegotiation of CUSMA leading to improved trade relations. If CUSMA were to terminate, the report predicts significant job losses – 214,000 in the U.S. and 102,000 in Canada compared to the status quo. Conversely, a 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 U.S.-Canada trading relationship for both nations’ prosperity, stressing the potential job losses and economic impacts in case of a breakdown. The report forecasts substantial GDP losses for both countries if CUSMA fails, with the U.S. economy losing $1.04 trillion US and Canada $271 billion Cdn by 2035. Inflation rates would rise, and real disposable income growth would be hindered, especially in Canada.
The worst-case scenario would heavily impact manufacturing sectors in the U.S., particularly in auto, wood product, and metal product industries. Similarly, Quebec and Ontario in Canada would bear the brunt of manufacturing losses if CUSMA collapses.
As the deadline approaches for new tariffs on Canadian goods, efforts persist to reach a trade deal before the looming tariff implementation. Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer are actively engaged in negotiations, aiming to present a potential trade agreement to President Donald Trump soon.
Burke acknowledged the ongoing talks and suggested that concessions might be necessary from both sides to secure a deal. If negotiations fail and new tariffs are imposed, central Canadian manufacturers are expected to be hit hardest.
The potential impact on various industries was highlighted, with cement and concrete manufacturers expected to face significant consequences, followed by paper product makers and others. Provinces like Ontario, New Brunswick, and Quebec are anticipated to be most affected due to their reliance on these sectors, while provinces like Saskatchewan, Alberta, and Newfoundland and Labrador may experience lesser impacts.
The critical nature of the ongoing discussions underscores the significance of trade relations between the U.S. and Canada for the economic well-being of both countries.