In ongoing trade discussions to prevent additional U.S. tariffs, a recent study cautions that the collapse of the Canada-U.S.-Mexico Agreement could result in a substantial loss of jobs and significant economic repercussions for both countries. Commissioned by the Canadian American Business Council and conducted by Oxford Economics, the report assessed the potential outcomes of the current trade negotiations between the U.S. and Canada.
Three scenarios were analyzed: maintaining the existing tariffs, dissolution of the CUSMA agreement, and successful renegotiation leading to an improved trading relationship. If CUSMA were to end, the report projects a loss of 214,000 American and 102,000 Canadian jobs 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, the CEO of the Canadian American Business Council, emphasized the significance of the U.S.-Canada trading relationship for the prosperity of both nations. The potential consequences go beyond job losses, with the breakdown scenario predicted to cost the U.S. economy $1.04 trillion and Canada $271 billion by 2035. Inflation rates would likely rise, and real disposable income growth would be hampered, particularly in Canada.
The report highlights that manufacturing sectors, including automotive, wood products, and metal manufacturing, would be severely impacted in the worst-case scenario, affecting states like Iowa, Michigan, Kentucky, and Alabama. In Canada, Quebec and Ontario would bear the brunt of the fallout, given their significant manufacturing presence.
As the deadline approaches for new 50% tariffs on various Canadian goods, efforts are ongoing to reach a deal before the deadline. Trade Minister Dominic LeBlanc is engaged in discussions with U.S. Trade Representative Jamieson Greer to present a potential agreement to President Donald Trump. Concessions from both sides may be necessary for a successful resolution.
The looming trade tensions stem from grievances over alleged discrimination against U.S. dairy products, retaliatory auto tariffs, and provincial alcohol bans. Negotiations are ongoing to address these issues, with the hope of avoiding the implementation of new tariffs. Manufacturers of cement, concrete, paper products, wood, computers, electronics, plastics, and rubber are expected to be heavily impacted if the tariffs are imposed. Provinces like Ontario, New Brunswick, and Quebec are likely to be hardest hit due to their reliance on these sectors.
