As we move into the final sprint of the US election, it bears as always to pay attention to the economic implications for Canada. Whatever one’s political priors or favorites may be in this election, in the end it needs to be realized that when it comes to US trade and economic interests, it does not matter whether Trump or Harris wins– American interests trump (no pun intended) Canadian ones. And in the case of the economy and our trade relationship with the United States, be prepared for some tough bargaining. While 2024 marked the 30th Anniversary of NAFTA, it has since 2020 been replaced by the USMCA or CUSMA agreement with renewal talks beginning in 2026.
Along with perennial sticking points like milk and dairy or softwood lumber, in the United States, despite what economists and evidence might say about economic growth and the benefits of trade in the wake of NAFTA and CUSMA, the debate will be shaped by the widespread belief that NAFTA in particular resulted in job losses and wage stagnation. In the case of manufacturing, the accompanying graphic summarizes quite nicely why the Americans are going to be playing hardball. In many respects, US manufacturing job losses did coincide with NAFTA.
Figure 1 presents annual Canadian and American manufacturing employment from 1976 to 2023 using a dual scale since US employment and population in general is about ten times ours. In 1994, there were nearly 19 million Americans employed in manufacturing and 1.8 million in Canada. In the decade afterwards, by 2005, US manufacturing employment fell to 16.2 million while Canadian manufacturing grew to 2.2 million. In the wake of NAFTA, American manufacturing employment fell by 14 percent while Canadian manufacturing employment rose by 20 percent.
Since 2005, American manufacturing employment has declined slightly to 15.6 million while Canada’s declined to about 1.8 million where it has stabilized somewhat. In other words, over thirty years, Canada has stayed flat in terms of total manufacturing employment (notwithstanding the rise and fall from 1994 to about 2010) while the US has seen a decline. The good news is that since about 2019, as evidenced by the 5th order polynomial smoothing line, both countries have seen a slight increase in manufacturing employment as a result of fallout from the pandemic, trade issues with China and the rise of onshoring production activities.
Yet those same polynomial smooths show a pretty consistent decline for the US since 1976 with Canada doing somewhat better. True, Canada is not to blame for the decline in US manufacturing. Both countries have seen a decline in manufacturing employment over time both in absolute numbers as well as a share of total employment. It is not 1960 anymore. There have been productivity issues in both countries as well as intense competition starting in the 1990s from China and other Asian economies as well as Mexico which is/was a part of CUSMA/NAFTA. However, that does not matter. For the United States, creating jobs in manufacturing will mean looking at all the players – including Canada. It will not matter whether Harris or trump becomes President in this regard. Notice has been served.
