Deadlocked Trade Deal Could Cause Permanent Economic Fallout, Business Groups Say

Industry groups are urging Canada and the United States to resume trade talks, warning a parliamentary committee this week that ongoing uncertainty threatens to permanently undermine the economy.

Canadian American Business Council CEO Beth Burke told the foreign affairs committee meeting this week that the absence of a trade agreement risks curtailing business investment in ways that could be hard to undo.

“I hope both sides can get back to the table, both governments need to return to negotiations with the goal of a deal that restores predictability for both economies,” she said. “Every day without a deal adds new hurdles for businesses and impacts investment decisions in ways that are difficult to reverse.”

Business Council of Canada President and CEO Goldy Hyder stressed the economic importance of predictability. He told the committee the uncertainty over trade tensions are making business leaders reluctant to commit capital and advance major projects.

“Businesses can manage tariffs, they can manage regulation, they can manage competition,” he said during Oct. 7 testimony. “What is much harder to manage is uncertainty about the rules under which they will be making billions of dollars of investment decisions for five, 10, to 20 years or more from now. That is why the ongoing review and renewal of the Canada-United States-Mexico agreement is so important.”

The session marked the first committee-level conversation on Canada-U.S. trade relations since the collapse of negotiations in late August and the United States’ implementation of Section 338 tariffs.

Prime Minister Mark Carney said at the time that the White House had asked for concessions that would impact Canada’s sovereignty and trade with other nations. He responded to U.S. tariffs with matching ones on Sept. 8.

The breakdown in talks came months after U.S. President Donald Trump announced he would not pursue renewal of the Canada-United States-Mexico Agreement (CUSMA). That decision automatically sets in motion at least a decade of recurring annual evaluations.

US Deal Can’t Be Replaced: Experts

Hyder said the situation between the two countries is affecting businesses on both sides of the border.

“From the perspective of Canadian business, the objective should be clear: preserve and strengthen the predictable rules-based economic relationship that has served all three countries well,” he noted. “A renewed agreement would provide something investors desperately need: confidence.”

He suggested three priorities to the committee: strengthening North American ties, strengthening Canada by making it easier to invest, build, hire, and grow businesses; and continue expanding Canada’s options abroad, but “not as an alternative to the United States.”

Burke agreed a deal with the Americans is essential for Canada’s economy.

She said a trade deal with the United States would be “difficult to replicate” with other countries because it has been “built on decades of integration and collaboration.”

Automotive Parts Manufacturers’ Association President Flavio Volpe told the committee the United States can’t be replaced as a trading partner.

“Diversification should not mean disengagement from the United States,” he said. “We should build more with the rest of the world without pretending that we can or should build less with our largest customer and closest industrial partner.”

Volpe described the integration between the countries as a production system built across the border, particularly in the automotive sector.

“We don’t really trade automobiles with the United States, but we make automobiles together,” he said. “Canadian parts going to American vehicles, American parts going to Canadian vehicles, components, materials, and tooling can cross the border several times before a finished paper reaches a consumer.”

Volpe told the committee car manufacturers are struggling to manage the tariff landscape, emphasizing that tariffs are driving up costs for both nations.

Jobs Linked to Deal

Burke told the committee that roughly 1.5 million American jobs and 2.4 million Canadian jobs are directly linked to a relationship between the countries, warning that the lack of a trade deal threatens workers and businesses.

Canada-U.S. Trade Minister Dominic Leblanc and U.S. Trade Representative Jamieson Greer have said informal talks continue, but structured negotiations remain at a standstill.

Canadian businesses have modified operations to navigate the tariff landscape during this impasse, but these stopgap measures are unsustainable in the long term, Burke said.

She referenced a report her organization commissioned from Oxford Economics to delve into the true costs and benefits of a U.S.-Canada trade deal.

She said successful renegotiation of CUSMA would add $253 billion to the Canadian gross domestic product over the next decade and that a breakdown would cost $271 billion.

Canadian households face a difference of roughly $846 per year depending on which direction is taken, Burke said. For the broader Canadian workforce, this decision represents either an additional 98,000 employment opportunities or a loss of more than 100,000 jobs.

“Free and fair trade, CUSMA, and integration isn’t a favour one country does for the other. These are frameworks that benefit workers, businesses, and consumers in both countries,” she added. “The question isn’t whether Canadians and Americans will keep doing business together—we will. The question is whether it will be stable and profitable, or costly and turbulent.”