A fresh analysis cautions that if the Canada-U.S.-Mexico Agreement (CUSMA) collapses, it could result in significant job losses and economic repercussions on both sides of the border. The report, conducted by Oxford Economics for the Canadian American Business Council and released recently, examined the potential outcomes of the ongoing trade discussions between the U.S. and Canada. It outlined three scenarios: the continuation of current tariffs, a breakdown of the CUSMA agreement, and a successful renegotiation that improves the trade relationship.
In the event of CUSMA termination, approximately 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 could lead to 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 the prosperity of both nations, stressing the impact on jobs, stability, and affordability.
The report also forecasted significant GDP effects in both countries if CUSMA collapses, estimating a $1.04 trillion loss for the U.S. and a $271 billion loss for Canada by 2035. Inflation rates would likely rise, and real disposable income growth would be hindered, particularly in Canada. Conversely, successful negotiation could lead to increased disposable income, lower inflation, and substantial GDP gains for both countries.
The report highlighted that in a worst-case scenario, manufacturing sectors in the U.S., including auto, wood product, and metal manufacturing, would suffer most. Similarly, Quebec and Ontario in Canada would bear the brunt of the breakdown, with significant impacts on the manufacturing industry.
As the looming deadline for new tariffs approaches, trade representatives are striving to reach a deal to avert the potential economic fallout. Canadian Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer are engaged in negotiations, aiming to present a trade deal to President Trump before the tariff deadline. Both sides may need to make concessions for an agreement to be reached.
Should negotiations fail, manufacturers in central Canada are expected to be severely affected by the new tariffs. A recent report from Oxford Economics identified cement, concrete, paper products, wood, computers, electronics, plastics, and rubber as the sectors most at risk. Ontario, New Brunswick, and Quebec are projected to be the hardest-hit provinces due to their reliance on these industries, while Saskatchewan, Alberta, and Newfoundland and Labrador are anticipated to be less impacted.