OTTAWA — A recent report from Oxford Economics highlights the potential fallout of a breakdown in the Canada-U.S.-Mexico Agreement (CUSMA), indicating that Canada could face a loss of 102,000 jobs. The research, commissioned by the Canadian American Business Council, explores a variety of scenarios pertaining to CUSMA, including its termination.
According to the report, the United States stands to lose approximately 214,000 jobs by 2027 if CUSMA is abandoned. The job losses would predominantly affect manufacturing sectors directly impacted by tariffs. However, it also notes that the service sector would experience declines as reduced disposable income leads households to cut back on consumer spending, consequently lowering demand for transportation, construction, and professional services.
The successful renegotiation of CUSMA, on the other hand, could yield significant job creation, with projections of 137,000 new American jobs and 98,000 Canadian jobs. The report emphasizes that the current trade environment is not a neutral state; rather, maintaining existing tariffs stagnates export growth and keeps unemployment rates elevated in both nations.
Bea Bruske, president of the Canadian Labour Congress, voiced concerns about the fragility of Canadian workers in the ongoing trade negotiations, stating, “There are real jobs on the line, and the government needs to be ready to defend them." She stressed that Canada must understand its objectives in negotiations, including delineating red lines and having a plan in place to protect workers should the United States withdraw.
The report identifies several provinces and states that would be worst hit if CUSMA were to collapse, including Ontario, Quebec, Manitoba, New Brunswick in Canada, and Michigan, Indiana, Washington, and Iowa in the U.S. The sectors most vulnerable in Canada would encompass autos, metals, machinery, electronics, chemicals, wood, and paper products.
Beth Burke, CEO of the Canadian American Business Council, remarked on the tangible economic impacts of trade agreements, noting, “The economic consequences are real and we should go into any negotiation with eyes wide open.” The report estimates that a successful renegotiation could be valued at approximately $516 per American household and about $846 in Canadian dollars for Canadian households annually, an impactful sum during times of economic strain.
Adding to the complexity, new American tariffs covering a range of Canadian goods are set to be implemented on August 19, 2026, without any exemptions for products compliant with CUSMA. In response, Canada-U.S. Trade Minister Dominic LeBlanc and Canada’s chief trade negotiator Janice Charette are currently engaged in discussions in Washington aimed at addressing these tariffs and the broader renegotiation of CUSMA.
In recent social media updates, LeBlanc indicated ongoing discussions with U.S. Trade Representative Jamieson Greer, emphasizing the Canadian government’s commitment to advance and defend its interests during negotiations. The spokesperson for LeBlanc, Gabriel Brunet, noted that discussions have broadly encompassed the impending tariffs, existing sectoral tariffs, and CUSMA renegotiations.
Burke expressed cautious optimism, stating, “Every time they get together and hash out and have more meaningful substantive conversations is another step towards getting to the right place on an agreement.” The report also underlines the critical importance of the trade relationship between the two countries, with estimates indicating that approximately 1.4 million American jobs and 2.5 million Canadian jobs depend highly on bilateral trade dynamics.
The report warns that reversing this intricate trade integration could not only eliminate its direct benefits but also impose significant transition costs for businesses that would need to reconstruct complex supply chains developed over decades, resulting in lasting efficiency losses. Julian Karaguesian, a McGill University lecturer and former special adviser at Finance Canada, asserted that maintaining current tariff levels is the most probable outcome. He also pointed out that while Canada’s trade with the U.S. has declined, trade with other countries is on an upward trend, as the Liberals aim to double non-U.S. exports over the next decade.
Samantha Lafleur, a spokesperson for Global Affairs Canada, noted that in the first quarter of this year, non-U.S. exports of goods and services were significant, valued at $96.2 billion. However, the report stresses that current tariffs mark a substantial deviation from pre-2025 levels, indicating that terminating CUSMA would lead to significant increases in tariffs for both countries.
Overall, the report suggests that a successful renegotiation of CUSMA could bring bilateral tariffs close to their pre-2025 levels of around one percent, with only limited additional tariffs remaining on steel, aluminum, and Canadian dairy products.
