As negotiations to prevent new U.S. tariffs progress, a recent study cautions that the collapse of the Canada-U.S.-Mexico Agreement (CUSMA) could result in significant job losses and economic repercussions on both sides of the border. The analysis, conducted by Oxford Economics for the Canadian American Business Council and unveiled on Monday, assessed the potential outcomes of the trade discussions between the U.S. and Canada.
The study outlined three scenarios: the continuation of current tariffs, a breakdown of the CUSMA agreement, and a successful renegotiation leading to improved trade relations. If CUSMA were to disband, an estimated 214,000 American and 102,000 Canadian jobs would be at risk compared to the status quo. Conversely, a successful renegotiation could create job opportunities, with projections indicating gains of 137,000 jobs in the U.S. and 98,000 in Canada.
Beth Burke, CEO of the Canadian American Business Council, emphasized the significance of the U.S.-Canada trading partnership for the prosperity of both nations. The report also projected substantial economic repercussions in case of agreement failure, estimating potential GDP losses of $1.04 trillion for the U.S. and $271 billion for Canada by 2035. Inflation rates are expected to rise in the short and long term, while real disposable income growth may be hampered, particularly in Canada.
The report’s worst-case scenario suggests severe impacts on manufacturing sectors in both countries, with industries such as auto manufacturing, wood products, and metal products facing challenges. Notably, regions like Iowa, Michigan, Kentucky, and Alabama in the U.S., and Quebec and Ontario in Canada, would bear the brunt of manufacturing losses in the event of a CUSMA breakdown.
As the deadline approaches for potential new tariffs on Canadian exports, efforts to reach a trade deal continue. Canadian Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer are engaged in discussions to present a possible agreement to President Donald Trump. Successful negotiations may require concessions from both sides, underlining the essence of compromise in reaching a mutually beneficial outcome.
In the face of looming trade uncertainties, ongoing talks aim to avert detrimental tariffs and safeguard the economic interests of both nations. The importance of a stable and cooperative trading relationship between the U.S. and Canada is underscored by the potential consequences of failed trade negotiations.
