Successful CUSMA deal would mean $850 per Canadian household each year: Oxford
‘The United States and Canada have built one of the world’s most successful and embedded economic partnerships in the world,’ Beth Burke, chief executive officer of the Canadian American Business Council, wrote in the report. ‘Yet today we face a period of turbulence.’ / CABC PHOTO
A breakdown of the Canada-U.S.-Mexico Agreement could cost the United States and Canada more than US$1.2 trillion in combined economic output over the next decade and put 316,000 jobs at risk in a single year, according to a new Oxford Economics analysis commissioned by the Canadian American Business Council.
The report estimates that, relative to the current tariff regime, a successful renegotiation of CUSMA would generate an additional US$432 billion in U.S. GDP and C$253 billion in Canadian GDP between 2026 and 2035. A complete breakdown of the agreement, by contrast, would reduce cumulative GDP by US$1 trillion in the United States and C$271 billion in Canada over the same period.
The effects would reach households as well as governments and businesses. Compared with a CUSMA breakdown, successful renegotiation would be worth approximately US$516 per U.S. household and C$846 per Canadian household each year.
The employment consequences would also be significant. A successful renegotiation would create an estimated 137,000 additional American jobs and 98,000 Canadian jobs in 2027 compared with the current status quo. A breakdown would instead mean 214,000 fewer jobs in the United States and 102,000 fewer in Canada.
The findings come as the two countries enter an open-ended period of annual CUSMA reviews. The July 1, 2026, deadline to extend the agreement passed without renewal, leaving businesses and investors to navigate a trade relationship that has already been reshaped by tariffs.
“The United States and Canada have built one of the world’s most successful and embedded economic partnerships in the world,” Beth Burke, chief executive officer of the Canadian American Business Council, wrote in the report. “Yet today we face a period of turbulence.”
The pitchfork in the road
Oxford Economics examined three potential paths for the North American trade relationship. The Status Quo scenario assumes permanently higher tariffs remain on steel, aluminum, autos and certain non-CUSMA-compliant goods. The Successful Renegotiation scenario assumes the agreement is formally extended and most tariffs return close to their pre-2025 levels. The CUSMA Breakdown scenario assumes the agreement is terminated, triggering broad-based tariff increases across most goods.
The analysis suggests the Status Quo is already producing economic costs. The effective U.S. tariff rate on Canadian goods is estimated at 6.5%, while Canada’s effective rate on U.S. goods is 1.9%. Under a complete breakdown, those rates would rise to 10.5% and 5.9%, respectively.
A successful renegotiation, by contrast, would bring bilateral tariffs back toward roughly 1%, according to the modelling.
An estimated 1.4 million American jobs and 2.5 million Canadian jobs depend on that trade. The relationship encompasses complex supply chains in which finished products and intermediate goods cross the border repeatedly, helping businesses reduce costs and improve productivity.
The report warns that unwinding those networks would impose costs beyond the tariffs themselves. Companies would face the expense and disruption of rebuilding supply chains developed over decades, while economies would experience longer-term efficiency losses.
Manufacturing would be among the sectors hardest hit. Autos and metals are directly targeted by tariffs in the Status Quo and Breakdown scenarios, while the removal of CUSMA exemptions would expose a broader range of manufactured and agricultural goods.
Canada would particularly be affected as manufacturing industries are more dependent on bilateral trade. The report estimates that sectoral impacts can be four to six times larger in Canada than in the United States.
The geographic consequences would also be concentrated. In the United States, Indiana, Michigan, Texas, Arizona, Washington and Alabama are among the states identified as most vulnerable to tariff escalation because of their large manufacturing sectors.
A failed deal will have disproportionate effects
In Canada, Ontario and Quebec would see the largest impacts, reflecting their concentration of automotive, metals and other manufacturing activity. Manitoba and New Brunswick would also be disproportionately affected.
Consumers would feel the effects through higher prices. Under a CUSMA breakdown, 2027 inflation is projected to reach 2.4% in the United States and 2.6% in Canada, compared with 2.1% and 2.2% respectively under the Status Quo. By 2035, consumer prices would remain about 0.7% higher in the United States and 0.6% higher in Canada than under the Status Quo.
The report also projects a lasting reduction in trade volumes under a breakdown, with U.S. exports falling 4.5% and Canadian exports 6.2% by 2035.
“Tariffs ultimately do not grow the American manufacturing sector, nor do they shrink the U.S. trade deficit,” the report states.
The analysis acknowledges that the political pressures behind U.S. protectionism are rooted in genuine economic concerns. Trade liberalization increased overall incomes but left some manufacturing communities behind, while persistent goods-trade deficits have coincided with a shrinking U.S. industrial base.
“Our analysis does not dispute that these concerns are real. What it does show is that tariffs on Canada are a poor instrument for addressing them,” the report says.
“With [CUSMA], both nations realize the benefits of stronger GDP, lower inflation, increased jobs and higher household savings,” Burke wrote. “By contrast, tariffs and a [CUSMA] breakdown adversely impact affordability on both sides of the border.”
She called for governments and the private sector to focus on preserving the economic relationship that has developed across the border.
“This is not a moment for uncertainty to define our future,” Burke wrote. “It is a moment to reaffirm the principles that have made North America one of the world’s strongest economic regions and to build a more resilient partnership for the decades ahead.”
