As negotiations to prevent new U.S. tariffs persist, a fresh report cautions that the collapse of the Canada-U.S.-Mexico Agreement could result in significant job losses and substantial economic repercussions on both sides of the border. The study, commissioned by the Canadian American Business Council and conducted by Oxford Economics, examined the potential outcomes of the current trade talks between the U.S. and Canada.
The report assessed three scenarios: maintaining existing tariffs, a breakdown of the CUSMA agreement, 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 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. The report also projected significant economic impacts, with the breakdown scenario forecasted 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 hindered, particularly in Canada.
The report highlighted that in a worst-case scenario, U.S. manufacturing sectors such as auto, wood products, and metal manufacturing would be severely affected, impacting states like Iowa, Michigan, Kentucky, and Alabama. Similarly, the manufacturing hubs in Quebec and Ontario in Canada would face significant challenges if CUSMA were to falter.
As the deadline for new tariffs approaches, Canada-U.S. Trade Minister Dominic LeBlanc is engaged in discussions with U.S. Trade Representative Jamieson Greer to reach a potential trade agreement before the looming tariffs take effect. Negotiations are ongoing, with concessions expected from both sides to secure a deal.
The report underlines the importance of reaching a resolution to prevent the potential economic fallout and job losses on both sides of the border. This ongoing negotiation process is crucial for maintaining the stability and growth of the U.S.-Canada trade relationship.