The CUSMA Cliff: What a Trade Breakdown Means for Canada's Economy
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A new report warns of massive job losses and industrial gutting if the Canada-U.S.-Mexico agreement collapses.
Q: What is the primary warning regarding the Canada-U.S.-Mexico agreement (CUSMA)?
A: As CityNews Toronto first reported, a report from Oxford Economics prepared for the Canadian American Business Council warns that Canada faces the potential loss of 102,000 jobs if the CUSMA trade deal breaks down. The report warns that reversing the trade integration between the two nations would not only eliminate direct benefits but force businesses to endure substantial transition costs to rebuild complex supply chains developed over several decades, leading to long-term efficiency losses.
Q: Which specific Canadian industries are most at risk?
A: Reporting from CityNews Toronto indicates that the deepest impacts would be felt in the following sectors: autos, metals, machinery, electronics, chemicals, wood products, and paper products.
Q: How does this impact the United States?
A: The Oxford Economics report states that the U.S. would see 214,000 jobs disappear in 2027 should CUSMA be ended. While manufacturing industries would be directly hit by tariffs, the service sector would also suffer as decreased disposable income leads to lower consumer spending, and reduced trade and investment dampen demand for professional services, construction, and transportation.
Q: Which regions are most vulnerable to these trade disruptions?
A: The report identifies several provinces and states that would be most affected, specifically Ontario, Quebec, Manitoba, and New Brunswick in Canada, and Michigan, Indiana, Washington, and Iowa in the United States.
Q: What is the immediate threat regarding tariffs?
A: CityNews Toronto reports that a new round of American tariffs, set at 50 per cent on various Canadian goods, is scheduled to take effect on Aug. 19. Notably, these tariffs—instituted by U.S. President Donald Trump—will not provide exemptions for goods that comply with CUSMA.
Q: What are the potential outcomes of the current trade negotiations?
A: The report suggests two divergent paths. A successful renegotiation of CUSMA could create 98,000 jobs for Canadians and 137,000 jobs for Americans, while bringing bilateral tariffs down to near pre-2025 levels of approximately one per cent (though limited tariffs on Canadian dairy, aluminum, and steel would likely remain). Conversely, the termination of the deal would lead to large increases in tariffs for both countries.
Q: What is the current status of the diplomatic effort to save the deal?
A: Canada-U.S. Trade Minister Dominic LeBlanc is currently in Washington for trade discussions. According to Gabriel Brunet, a spokesman for LeBlanc, these talks have addressed the threatened new duties, the renegotiation of CUSMA, and existing sectoral tariffs. CityNews Toronto notes that Canada's trade team has held two meetings with U.S. Trade Representative Jamieson Greer within the last two weeks.
Q: How critical is the bilateral trade relationship to the overall workforce?
A: The scale of the relationship is massive; the Oxford Economics report estimates that the bilateral trade relationship supports 2.5 million jobs in Canada and 1.4 million in the U.S.