‘The choices made today will determine North America's economic competitiveness for decades to come’
Canada as a whole would take a big hit should there be a full breakdown of the Canada-United States-Mexico Agreement (CUSMA/USMCA), according to a report.
Such a scenario would cost Canada 102,000 jobs alone, notes the Canadian American Business Council (CABC).
"Successful renegotiation of USMCA would create an additional 137,000 American jobs and 98,000 Canadian jobs in 2027 relative to the status quo,” reads part of the CABC’s Economic Impacts of US-Canada Tariff Escalation Under the USMCA report.
“By contrast, the breakdown of USMCA would be accompanied by 214,000 and 102,000 fewer jobs, respectively, in the US and Canada."
The report models three outcomes following the July 1, 2026, deadline to renew USMCA, which passed without a formal agreement: a Status Quo scenario, a Successful Renegotiation, and a full USMCA Breakdown.
“Many of these jobs would be in manufacturing industries directly impacted by tariffs, but the service sector would also feel the impact as lower disposable income causes households to reduce consumer spending and lower trade, and investment reduces demand for transportation, construction and professional services,” according to the report.
Previously, the Boston Consulting Group (BCG) advised Canadian companies to prepare for possible disruption ahead of the formal CUSMA review.
Regional and sectoral findings
The CABC report identifies Ontario, Quebec, Manitoba and New Brunswick as the provinces most exposed to tariff swings, given their concentration in auto, metals and machinery manufacturing.
Ontario and Quebec are "both the largest beneficiaries of tariff relief under Successful Renegotiation and the most damaged by tariff escalation under USMCA Breakdown," according to the report.
"Given greater dependence on bilateral trade among Canadian manufacturing industries, the sectoral impacts from tariffs are often four to six times as large for Canada" compared with the US, noted the CABC.
CABC CEO Beth Burke said businesses on both sides of the border are seeking clarity as negotiations continue. "The choices made today will determine North America's economic competitiveness for decades to come.
"Businesses on both sides of the border are looking for predictability."
Household income impacts
The report also quantifies the effect on individual households, noting that "choosing a Successful Renegotiation over a USMCA Breakdown is worth approximately US$516 per US household and C$846 per Canadian household per year."
Sustained inflation tied to tariffs is projected to persist even a decade after a breakdown scenario.
The report was released as part of ongoing CUSMA negotiations, with a joint review process now underway following the missed July 1 renewal deadline.
In June, Canada formally called for a 16-year renewal of the CUSMA as trade uncertainty continued to drive workforce instability across the country.
However, the US refused on July 1 to renew the CUSMA for another 16 years, extending a period of trade uncertainty that the Bank of Canada has already linked to five straight quarters of declining business investment.
