Canada's Economy Would Suffer 'Severe' Consequences from US Exit from CUSMA

A Deloitte Canada report warns that Canada's economy would suffer if the United States exits the North American trade pact, known as CUSMA. According to the worst-case scenario, a 1.6% decline in real GDP and a loss of 163,000 jobs per year could occur over the next decade. The manufacturing sector would be particularly hard hit, with a projected 28% drop in real GDP for motor vehicles and parts.

The report also found that Canada's oil and gas industry would face significant challenges if CUSMA were to collapse. Oil sales to the US could decline by 11%, while natural gas production could fall by 30%. The authors of the report suggest that Canada needs to look beyond trade diversification to mitigate the potential impact, including removing interprovincial trade barriers and fostering new industries.

The best-case scenario would see Canada maintaining its existing free-trade agreements while forging new ones. Under this scenario, real GDP could grow by 0.6% or $141 billion over the next decade, with almost 53,000 jobs created annually. The report notes that completely phasing out interprovincial trade barriers over five years could generate an additional $881 billion in economic output and create 133,000 new jobs.