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As trade talks aimed at avoiding fresh U.S. tariffs continue, a new report is warning that the breakdown of the Canada-U.S.-Mexico Agreement would lead to hundreds of thousands of job losses and major economic impacts on both sides of the border.
The report, prepared for the Canadian American Business Council by Oxford Economics — an independent economic advisory firm — and released Monday, analyzed the likely result of three different outcomes of the ongoing trade talks between the U.S. and Canada.
The scenarios were a status quo situation where current tariffs remain in place, a scenario where the CUSMA agreement breaks down, and one where CUSMA is successfully renegotiated and the trading relationship improves.
In the event that CUSMA were to end, a projected 214,000 American and 102,000 Canadian jobs would be lost, the report said, compared to the status quo scenario.
But if CUSMA were renegotiated successfully, the U.S. and Canada stand to add jobs — 137,000 and 98,000 of them, respectively.
“It means real jobs and security and stability [lost] at a time where affordability is front and centre for so many Canadians and Americans,” Beth Burke, the CEO of the Canadian American Business Council, told Power and Politics in an interview Tuesday.
Burke says the findings highlight just how important the trading relationship between the U.S. and Canada is to the success of both countries.
“This relationship matters,” Burke said.
The impacts also extend beyond jobs. According to the report’s estimates, the breakdown scenario would impact the GDP of both countries, costing the U.S. economy $1.04 trillion US and costing Canada $271 billion Cdn by 2035.
The pace of inflation would likely pick up in both countries in the immediate and long-term, while growth of real disposable income would be stunted, especially on the Canadian side.
A successful negotiation paints the opposite picture in the report’s projections — more disposable income for citizens on both sides of the border, slower inflation and GDP gains of billions for both countries.
A report released on Tuesday by the Canadian American Business Council presented the likely economic consequences of three possible outcomes of CUSMA negotiations. The findings indicated that hundreds of thousands of jobs on either side of the border hang in the balance of the ongoing trade talks. Power & Politics speaks to the CEO of the Canadian American Business Council, Beth Burke, about why the ongoing discussions on the ground in Washington matter.
On the U.S. side, manufacturing industries would be hit hardest in the report’s worst-case scenario — including losses in auto, wood product and metal product manufacturing. Hubs for that kind of work including Iowa, Michigan, Kentucky and Alabama would suffer as a result, the authors suggest.
And in Canada, the manufacturing hubs of Quebec and Ontario would feel the pain most if CUSMA broke down, as the report says manufacturing industries would take the biggest hit at home, too.
Trade reps still trying to cut a deal
The report comes as the Aug. 19 deadline looms for new 50 per cent tariffs on a range of Canadian products — from honey to plywood to hyacinth bulbs — that make up about five per cent of Canada’s exports to the U.S.
Officials are still working to cut a deal that would curb new tariffs before then.
Canada-U.S. Trade Minister Dominic LeBlanc was slated to meet with U.S. Trade Representative Jamieson Greer today — their third meeting in as many weeks. According to sources recently briefed on the matter, LeBlanc and his counterpart are aiming to present U.S. President Donald Trump with a possible trade deal as early as Monday.
That timeline would give the president at least a day to make a decision on the deal ahead of the deadline for the new tariffs to come into effect.
Burke says she’s glad to see talks continuing, and added that Canadians should be prepared to see concessions made on both sides for a deal to be reached.
“That’s what a negotiation means, that there needs to be movement from both ends to get to the right place,” she said.
Canadian companies vulnerable to new 50 per cent U.S. tariffs are rushing shipments and hoping a breakthrough deal will avert the punishing levies before the August 19 deadline.
When Trump’s administration first threatened the tariffs last month in a series of presidential proclamations, it cited grievances over Canada’s alleged discrimination against U.S. dairy products, retaliatory auto tariffs and provincial alcohol bans.
Prime Minister Mark Carney said last week that negotiators were discussing “all strategic sectors” with their counterparts in the hopes of making a deal.
But if a deal isn’t reached and fresh 50 per cent levies do come into effect next week, they’re expected to hit manufacturers in central Canada hardest.
Another new report out yesterday from Oxford Economics predicts that manufacturers of cement and concrete would feel the biggest impact, followed by paper product makers, with wood, computers and electronics, plastics and rubber manufacturers also being among the hardest hit.
“Manufacturers that face the stiffest tariff hikes, rely heavily on exports to the U.S., and whose products are easier to substitute away from would face the heaviest impact,” wrote the report’s co-authors, Tony Stillo, director of Canada Economics, and Michael Davenport, a senior economist.
Ontario, New Brunswick and Quebec would be the hardest-hit provinces according to their analysis, because of their dependence on these manufacturing sectors, while Saskatchewan, Alberta and Newfoundland and Labrador would better dodge the new tariffs.
