A fresh report is cautioning that if the Canada-U.S.-Mexico Agreement breaks down, it could result in significant job losses and economic repercussions on both sides of the border. The analysis by Oxford Economics for the Canadian American Business Council looked into potential outcomes of the ongoing trade negotiations between the U.S. and Canada.
Three scenarios were considered: the current status quo with existing tariffs, a scenario where the CUSMA agreement collapses, and a successful renegotiation leading to improved trade relations. If CUSMA were to dissolve, an estimated 214,000 American and 102,000 Canadian jobs would be at risk compared to the status quo. Conversely, successful renegotiation could create 137,000 new jobs in the U.S. and 98,000 in Canada.
The CEO of the Canadian American Business Council, Beth Burke, emphasized the significance of the U.S.-Canada trading relationship for both nations’ prosperity. The report also projected significant GDP impacts, with the breakdown scenario potentially costing the U.S. economy $1.04 trillion US and Canada $271 billion Cdn by 2035. Inflation rates would likely rise, and real disposable income growth would be constrained, especially in Canada, under a breakdown scenario.
In the worst-case scenario, U.S. manufacturing sectors such as auto, wood products, and metal manufacturing would suffer, affecting states like Iowa, Michigan, Kentucky, and Alabama. In Canada, Quebec and Ontario would bear the brunt due to their reliance on manufacturing industries.
Efforts to avert new 50% tariffs by the August 19 deadline are ongoing, with Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer working towards a possible trade deal. Talks between the two nations involve concessions from both sides to reach an agreement.
The potential impacts of failing to reach a deal include significant challenges for manufacturers in central Canada, particularly in sectors like cement, concrete, paper products, wood, computers, electronics, plastics, and rubber. Provinces like Ontario, New Brunswick, and Quebec are expected to be most affected, while Saskatchewan, Alberta, and Newfoundland and Labrador may fare better.
