A trade agreement can feel like legal architecture until its failure is translated into paycheques. A new analysis released by the Canadian American Business Council on August 10 says a breakdown of CUSMA—the agreement known as USMCA in the United States—would be accompanied by 102,000 fewer Canadian jobs and 214,000 fewer U.S. jobs compared with the status quo. The report draws on quantitative analysis and research from Oxford Economics and also finds that a successful renegotiation could push employment in the opposite direction in 2027.
The warning arrives at an unusually fragile moment. Washington declined on July 1 to extend the pact in its current form for another 16 years, but that did not terminate it. CUSMA remains in force and has moved into annual reviews, leaving businesses to operate under existing rules while governments negotiate what comes next.
The Headline Job Losses Are a Scenario, Not a Forecast
The most important detail in the new analysis is the comparison being made. The 102,000 Canadian jobs and 214,000 U.S. jobs are not positions that have already disappeared, nor does the report say the losses are inevitable. The Canadian American Business Council says the figures measure a CUSMA “breakdown” against a status-quo baseline. In other words, the analysis is designed to show how employment could differ if the trade framework deteriorates rather than continues broadly as it is. That distinction matters because economic scenario models are counterfactual exercises: they estimate how businesses, consumers, prices and production could respond under different policy settings. Oxford Economics has separately used scenario modelling in its 2026 work on the North American trade pact, including a worst-case path in which one or more countries ultimately backs away from CUSMA.
The scale is still notable. Together, the headline estimates amount to more than 300,000 fewer jobs across Canada and the United States compared with the status quo. The CABC summary says manufacturing is the industry group most affected across the scenarios it examined, reflecting how deeply production has been organized around predictable cross-border access. The warning is therefore less about an overnight disappearance of hundreds of thousands of positions and more about the economic path that could emerge if prolonged uncertainty turns into a lasting rupture. That distinction makes the findings more useful: they provide a measure of what could be at stake without presenting a hypothetical outcome as something that has already happened.
Canada Has Fewer Jobs at Risk, but Far Greater U.S. Exposure
At first glance, the U.S. number looks more severe: 214,000 fewer jobs compared with 102,000 in Canada. But the raw totals do not capture the relative importance of the relationship to each economy. Statistics Canada reported that 75.9% of Canadian merchandise exports went to the United States in 2024, while 62.2% of merchandise imports came from there. More than 85% of Canadian enterprises that exported goods in 2024 sold into the U.S. market. For thousands of firms, the border is not simply one sales route among many; it is the main commercial artery linking factories, distributors and customers.
That concentration helps explain why prolonged trade friction can become a national economic problem quickly. A machine shop in southern Ontario, a food processor in Quebec or an energy supplier in Alberta may sell entirely different products, yet all can depend heavily on U.S. buyers, suppliers or transportation networks. Canadian companies have increasingly looked for opportunities beyond the American market as trade tensions have intensified, but replacing decades of integration is difficult. Geography, infrastructure, regulatory compatibility and established customer relationships have made the United States unusually hard to substitute. The 102,000-job estimate therefore sits inside a larger vulnerability: Canada’s smaller economy has built a considerable share of its goods trade around a single neighbouring market, meaning even disruptions smaller than a complete CUSMA breakdown can have outsized effects.
Manufacturing Would Be the First Major Pressure Point
The CABC analysis identifies manufacturing as the most affected industry group across the scenarios it examined, and the reason is visible on factory floors. North American production frequently operates as a regional system rather than as three separate national systems. The automotive industry alone accounts for roughly 22% of trade under CUSMA, according to analysis published by Rice University’s Baker Institute. Industry groups also emphasize that vehicles and components routinely cross national borders multiple times before final assembly. A transmission, seat, metal stamping or electronic module can accumulate value in more than one country before a completed vehicle reaches a dealership. When border costs rise, manufacturers therefore do not necessarily pay a new expense just once; disruptions can reverberate through suppliers, inventories, production schedules and future investment.
Ontario offers a useful illustration of how manufacturing shocks can spread. In a separate tariff scenario published in 2025—not the same model behind the new CABC numbers—the province’s Financial Accountability Office estimated that Ontario could have 119,200 fewer jobs in 2026 than under a no-tariff outlook, including 57,700 fewer manufacturing jobs. The FAO also warned that weaker manufacturing would spill into industries such as trade, transportation and professional services. That is why a CUSMA breakdown would not end at assembly lines. Reduced factory output can eventually mean fewer trucking loads, smaller warehouse volumes, weaker demand for engineering services and less spending in communities whose household incomes depend on industrial employment.
Why the United States Could Lose More Jobs in Raw Numbers
The 214,000 U.S. figure challenges the idea that dismantling preferential trade with Canada would primarily hurt Canadian workers. The United States has a much larger labour market, so a larger absolute job estimate does not mean it is more dependent on Canada than Canada is on the United States. It does, however, underscore how many American companies sell into Canada or participate in cross-border supply chains. U.S. government data show that more than 88,000 American small and medium-sized businesses exported over $74 billion in goods to Canada in 2023. Those exporters range from specialized manufacturers to agricultural suppliers and equipment producers, many of which treat Canada as part of their regular commercial territory rather than a distant foreign market.
The supply-chain relationship also runs both ways. American manufacturers use Canadian materials and components, while Canadian companies purchase U.S.-made machinery, equipment, parts and services. If preferential trade deteriorates, an American firm can face two pressures at once: imported inputs may become more expensive while Canadian customers face stronger incentives to reduce U.S. purchases. That mechanism helps explain why a trade breakdown can produce U.S. job losses even when Washington’s objective is to encourage more domestic manufacturing. Some individual plants could benefit from greater protection while exporters, downstream manufacturers and suppliers elsewhere lose business. The CABC estimate highlights the difference between protecting a particular industry and improving employment across an economy as a whole.
Higher Tariffs Can Raise Costs Before They Create New Factories
The new CABC release makes one of its strongest conclusions on tariffs: its analysis says tariffs ultimately do not expand the U.S. manufacturing sector or shrink the U.S. trade deficit. That finding cuts to the central economic argument surrounding a potential CUSMA breakdown. A tariff can make an imported product more expensive and potentially give a competing domestic producer an advantage. But manufacturers themselves are major consumers of imported products, including metals, machinery and intermediate components. In an integrated production system, a policy designed to protect one stage of manufacturing can raise costs for another company farther down the supply chain, reducing the competitiveness of the finished product.
Bank of Canada modelling has demonstrated the same basic transmission channel from another angle. In a hypothetical broad tariff-and-retaliation scenario published in 2025, the Bank found that U.S. import tariffs would increase prices paid by American consumers, while retaliation by trading partners would reduce demand for U.S. exports and slow U.S. economic growth. Businesses could initially absorb some costs through smaller profit margins before passing more into prices. For Canada, weaker U.S. demand would weigh on exports, while retaliation and higher import costs would hurt businesses and consumers at home. Those interconnected effects help explain why a deterioration in CUSMA can reduce employment on both sides of the border even when each government is trying to protect its own workers.
The Damage Can Start Before CUSMA Actually Breaks
Trade agreements influence investment partly because they give companies greater confidence about the rules that will apply years into the future. That matters enormously for manufacturing, where building a plant, installing a production line or developing specialized tooling can require large upfront investments that take years to recover. Canadian Manufacturers & Exporters found in June that 73% of surveyed manufacturers expected failure to secure a full 16-year CUSMA renewal to hurt their businesses to a moderate or great extent. Among manufacturers affected by changes to U.S. metal tariffs, 30% said they were delaying, reducing or cancelling investment in Canada, while 25% reported reducing employment, hours or shifts.
The human consequences can already be seen in communities closely tied to cross-border manufacturing. Reuters reported earlier this year that businesses in Windsor, Ontario, had paused investments, delayed production and cut jobs during periods of intense tariff uncertainty. One local homebuilder told Reuters that 13 of 21 employees had been laid off as confidence and housing activity weakened, although some workers were later rehired. It illustrates how trade anxiety can move from a factory order book into household decisions, real estate and local stores. A formal treaty collapse is therefore not required for economic costs to emerge. If companies believe future market access is uncertain, they can defer investments and hiring decisions today rather than gamble millions of dollars on rules that may change tomorrow.
CUSMA Is Still in Force, but the Review Has Become a Longer Negotiation
The July 1 review produced a consequential outcome, but it did not mean the immediate end of North American free trade. The United States declined to extend CUSMA in its current form for another 16 years. Under the agreement’s review mechanism, however, the pact remains in force while the three countries conduct annual reviews, with its current expiry date still set for July 1, 2036 unless the governments agree to extend it. Existing CUSMA rules therefore continue to matter today. For a company planning a cross-border shipment, the agreement has not vanished; the uncertainty concerns how its rules may eventually be rewritten and whether all three governments can find terms they are prepared to extend.
That process could take considerable time. U.S. Trade Representative Jamieson Greer said in July that Washington hoped to reach interim arrangements with Canada and Mexico before the end of 2026 while pushing some of the more difficult CUSMA changes into 2027. Reuters identified automotive rules of origin, labour provisions and environmental standards among the complicated issues still being negotiated. Washington has also pushed for higher North American—and under some proposals specifically American—content requirements in vehicles. For businesses, the realistic near-term risk is therefore not one dramatic expiration date. It is an extended period in which tariffs, sourcing requirements and expectations about future market access can keep changing, making long-term investment decisions considerably harder.
A Successful Renegotiation Could Reverse the Job Math
The same CABC analysis that produces the alarming downside also models a considerably more positive outcome. According to the report’s release, a successful CUSMA renegotiation would be associated with 137,000 additional U.S. jobs and 98,000 additional Canadian jobs in 2027 compared with the status quo. The contrast with the breakdown scenario is striking, leaving a difference of hundreds of thousands of positions between the two possible economic paths. That does not mean signing a revised agreement would automatically create every modeled job. Rather, the result indicates that the model associates a successful trade outcome with substantially stronger employment than a deterioration of the existing framework.
That upside is also why the 2026 CUSMA fight is about more than preserving the precise text negotiated six years ago. Governments are debating tariffs, market access, rules of origin and the future structure of North American production while corporations are deciding where their next factories, supply contracts and investments will go. The CABC argues that collaboration and predictability are central to regional competitiveness. Its analysis is a business-group-sponsored contribution to the policy debate rather than an official government forecast, so its estimates should be understood as modeled scenarios rather than certainties. Still, its broad warning is consistent with government, central-bank and industry research: unwinding decades of North American economic integration would create costs on both sides of the border. The central question is increasingly not which country would escape the damage, but how much each would lose if cooperation gives way to economic separation.
