A fresh report cautions that the breakdown of the Canada-U.S.-Mexico Agreement during ongoing trade talks could result in significant job losses and economic impacts on both sides of the border. The analysis by Oxford Economics for the Canadian American Business Council explores three possible outcomes: maintaining current tariffs, CUSMA dissolution, and successful renegotiation leading to improved trade relations.
If CUSMA were to collapse, approximately 214,000 American and 102,000 Canadian jobs could be lost compared to the status quo. Conversely, successful renegotiation could potentially create 137,000 new jobs in the U.S. and 98,000 in Canada. The CEO of the Canadian American Business Council emphasized the importance of the U.S.-Canada trading relationship for the prosperity of both nations.
Beyond job losses, the report estimates that the GDP of both countries would suffer significantly in a breakdown scenario, projecting costs of $1.04 trillion for the U.S. and $271 billion for Canada by 2035. Inflation rates would likely rise, and real disposable income growth would be hindered, particularly in Canada. However, successful negotiations could lead to increased disposable income, lower inflation, and substantial GDP growth for both countries.
The report highlights potential adverse impacts on manufacturing industries in the U.S. and Canada if CUSMA fails. Notably, automotive, wood product, and metal product manufacturing sectors would be severely affected in the U.S., while Quebec and Ontario’s manufacturing hubs would bear the brunt in Canada.
Efforts to avoid new 50% tariffs on Canadian products are ongoing, with trade representatives working towards a deal before the looming deadline. Canadian Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer are striving to present a possible trade agreement to President Donald Trump for consideration. Both sides may need to make concessions for a successful deal to materialize.
Negotiations continue amidst concerns over potential tariffs impacting key manufacturing sectors in central Canada. If the tariffs come into effect, cement, paper products, wood, computers, electronics, plastics, and rubber industries would be among the most affected. Provinces like Ontario, Quebec, and New Brunswick are anticipated to face the greatest challenges due to their reliance on these sectors.
An additional report by Oxford Economics predicts that manufacturers heavily reliant on U.S. exports and facing significant tariff increases would experience the most substantial impact. Certain provinces, such as Ontario, New Brunswick, and Quebec, are expected to bear the brunt of the tariffs due to their sector dependence, while others like Saskatchewan, Alberta, and Newfoundland and Labrador may be less affected.