As negotiations to prevent additional U.S. tariffs progress, a recent study warns that the collapse of the Canada-U.S.-Mexico Agreement could result in significant job losses and major economic repercussions on both sides of the border.
Commissioned by the Canadian American Business Council and conducted by Oxford Economics, the report assessed the potential outcomes of the ongoing trade discussions between the U.S. and Canada. It considered three scenarios: maintaining current tariffs, the breakdown of the CUSMA agreement, and successful renegotiation leading to an improved trade relationship.
The report projected that if CUSMA were to dissolve, approximately 214,000 American and 102,000 Canadian jobs would be at risk compared to the status quo. Conversely, successful renegotiation could result in the creation of 137,000 jobs in the U.S. and 98,000 jobs in Canada.
Beth Burke, CEO of the Canadian American Business Council, emphasized the significance of the U.S.-Canada trading relationship for the prosperity of both nations, stressing the tangible impact on jobs, stability, and affordability.
In addition to job losses, the report outlined the economic implications of a breakdown in the agreement, estimating potential GDP losses of $1.04 trillion for the U.S. and $271 billion for Canada by 2035. This scenario would likely lead to increased inflation and hinder real disposable income growth, particularly in Canada.
Conversely, successful negotiations were forecasted to boost disposable income, curb inflation, and drive GDP growth for both countries. However, in a worst-case scenario of CUSMA collapsing, manufacturing sectors in states like Iowa, Michigan, Kentucky, and Alabama would be severely affected in the U.S., while Quebec and Ontario would bear the brunt of the impact in Canada.
Amidst the looming deadline for new tariffs on Canadian products, Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer are actively engaging in discussions to avert the tariffs. The negotiations aim to present a potential trade deal to U.S. President Donald Trump before the impending deadline.
Acknowledging the necessity for concessions from both sides, Burke expressed optimism about the ongoing talks, emphasizing the importance of compromise to reach a mutually beneficial agreement.
If negotiations fail and new tariffs are imposed, manufacturing industries in central Canada are expected to face the most significant repercussions, with sectors like cement, concrete, paper, wood, computers, electronics, plastics, and rubber being severely impacted.
The study from Oxford Economics highlighted the vulnerability of certain manufacturing sectors to tariff increases and identified Ontario, New Brunswick, and Quebec as the most vulnerable provinces due to their reliance on these industries. Conversely, Saskatchewan, Alberta, and Newfoundland and Labrador were projected to be less affected by the potential tariffs.
