A recent report suggests that failing to reach an agreement in ongoing trade discussions could result in significant job losses and economic consequences for the United States and its North American neighbors. The analysis conducted by Oxford Economics for the Canadian American Business Council explored three potential outcomes of the current trade negotiations between the U.S. and Canada.
In the event of the Canada-U.S.-Mexico Agreement (CUSMA) collapsing, the report predicts the loss of around 214,000 American and 102,000 Canadian jobs compared to the current tariff situation. Conversely, successful renegotiation of CUSMA could lead to 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 trade relationship between the two countries in maintaining job security and economic stability. The report also forecasts substantial negative impacts on the GDP of both nations if the agreement breaks down, with the U.S. facing a loss of $1.04 trillion and Canada $271 billion by 2035.
The potential repercussions extend beyond job losses, affecting inflation rates and disposable income growth. A breakdown in negotiations could accelerate inflation and hinder real income growth, particularly in Canada. Conversely, successful negotiations are projected to enhance disposable incomes, reduce inflation rates, and boost GDP for both countries.
The report highlights that in a worst-case scenario, manufacturing sectors in the U.S., such as auto, wood product, and metal manufacturing, would be severely impacted. Similarly, Quebec and Ontario in Canada would face significant challenges in their manufacturing industries if CUSMA were to collapse.
As the deadline approaches for new tariffs on Canadian exports, efforts are ongoing to reach a trade deal before the looming tariff implementation date. Trade representatives from both countries are working towards presenting a potential deal to President Donald Trump in the coming days to avert the new tariffs.
In the face of these uncertainties, Canadian businesses are rushing shipments to the U.S. in anticipation of the tariffs. Meanwhile, negotiations continue with discussions on various sectors to secure a favorable trade agreement. Failure to reach a deal could have profound implications for central Canadian manufacturers, particularly in sectors like cement, concrete, paper products, and other industries heavily reliant on exports to the U.S.