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A U.S. withdrawal from the Canada-United-States-Mexico trade agreement (CUSMA) would have a “severe but not cataclysmic impact on Canada’s overall economy, although perhaps cataclysmic for some sectors,” according to a new report released this week by Deloitte Canada.

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The report is titled “Tariffs: A rough road leads to new destinations,” and imagines two broad scenarios in the near future.

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In the first, the “CUSMA Withdrawal Scenario,” the U.S. opts out of CUSMA entirely. “Trade resets at Most-Favoured-Nation rates that apply to member countries in the World Trade Organization,” the report says. It assumes a 10 per cent global tariff imposed by the U.S. affects previously CUSMA-exempt sectors, including oil and gas.

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“There is potential for much worse if the Trump administration imposes further punitive tariffs on Canadian goods, as it has stated will happen in January,” the report notes, but it’s uncertain how long they would last and whether they would withstand legal and political challenges.

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Even without a worst-case-scenario, however, the outlook is rough. The report predicts Canadian GDP would fall 1.6 per cent by 2036 relative to where it was last July, representing $402 billion in lost GDP over the coming decade.

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“Domestic investment in things like infrastructure and machinery take a hit and employment is also projected to shrink by 163,000 jobs annually on average,” it says. “Average wages would likely decline, cutting into domestic consumption and household purchasing power.”

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The pain would not be shared equally, with sectors that rely heavily on exports suffering the most. Manufacturing could see a 28 per cent drop in GDP over the decade, while electronics, machinery and equipment could lose 21 per cent, rubber and plastics products 20 per cent, and chemicals 13 per cent.

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Oil and gas would fare better, with a loss of 0.4 per cent in GDP for oil and 0.9 per cent for natural gas — the “severe, not cataclysmic” part of the forecast.

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The second scenario is called “Accelerated diversification” and paints a somewhat rosier picture. In this “best-case scenario,” Canada maintains all its existing free trade agreements while successfully negotiating new ones elsewhere.

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Here the report predicts GDP growth of 0.6 per cent by 2036, representing $141 billion and the creation of 53,000 jobs a year. The gains aren’t as large as the losses under the first scenario, but at least they’re positive.

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“Agriculture … represents one of our highest potential growth sectors, particularly to the extent markets open in China and India,” the report finds, predicting a possible increase in crop exports to non-U.S. markets of $4 billion by 2036, and food manufacturing increases of $16 billion.