CUSMA Breakdown Would Cost Canada 102,000 Jobs, New Report Warns

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Canada’s trade relationship with the United States has entered a far more uncertain phase, and new economic modelling puts a number on what a full rupture could mean for workers. A report prepared by Oxford Economics for the Canadian American Business Council estimates that a breakdown of CUSMA could leave Canada with roughly 102,000 fewer jobs in 2027 than under the current trade-policy status quo.

The warning arrives at a sensitive moment. The United States declined to extend the North American trade agreement for another 16-year term at the July 1 review, although CUSMA remains in force. Canada, the United States and Mexico are now operating under an annual-review process while negotiations continue. The new modelling suggests the difference between eventually resolving those disputes and allowing them to escalate could be measured not only in tariffs and exports, but in jobs, household incomes and hundreds of billions of dollars in economic output.

The 102,000-Job Warning Is a Scenario, Not a Forecast of Mass Layoffs

The headline figure requires an important distinction. Oxford Economics is not saying 102,000 workers are certain to lose their jobs, nor is it estimating the total number of Canadians whose employment depends on CUSMA. Instead, its modelling finds that Canada would have approximately 102,000 fewer jobs in 2027 under a full CUSMA breakdown than under what it calls the “Status Quo” scenario. That represents roughly 0.5% of Canadian employment in the model.

The distinction matters because the status quo already includes substantial trade friction. Oxford Economics assumes existing tariffs remain on areas including steel, aluminum, autos and certain goods that do not comply with CUSMA rules. A breakdown goes considerably further: one or more countries formally withdraw, most existing CUSMA preferences disappear and much broader tariffs take effect. The study estimates that unemployment could reach 7.0% in Canada in 2027 under that scenario, compared with 6.5% under the status quo. In other words, the 102,000 figure measures the additional deterioration caused by moving from an already strained relationship to a much deeper trade rupture.

The Difference Between a Deal and a Breakdown Is About 200,000 Canadian Jobs

The more striking finding may be the distance between the report’s best and worst outcomes. Oxford Economics estimates that a successful renegotiation could support approximately 98,000 additional Canadian jobs in 2027 compared with the status quo. A breakdown would instead leave employment roughly 102,000 jobs below it. Put together, that creates a gap of about 200,000 Canadian jobs between the two scenarios.

That wide range helps explain why businesses care about more than simply preventing CUSMA from formally disappearing. Under the report’s successful-renegotiation scenario, the agreement would be extended and most bilateral tariffs would return close to their pre-2025 levels. The modelling estimates Canadian unemployment would fall to 6.1% in 2027, compared with 7.0% under a breakdown. Oxford Economics also argues that uncertainty itself can influence hiring because companies facing unclear market access may delay factories, equipment purchases or additional employees. For a manufacturer contemplating a multi-year investment in Ontario or Quebec, knowing whether its products will continue to move efficiently across the border can materially alter the economics of that decision.

Canada Could Lose C$271 Billion in Economic Output Over a Decade

Jobs are only one part of the estimated cost. Oxford Economics calculates that a CUSMA breakdown would reduce cumulative Canadian real GDP by approximately C$271 billion between 2026 and 2035 compared with the status quo. A successful renegotiation, by contrast, would add approximately C$253 billion over the same period. The difference between those two paths is therefore roughly C$523 billion in Canadian economic output.

The short-term growth figures illustrate how quickly the shock could appear. For 2027, the model puts Canadian real GDP growth at 1.0% under the status quo and 1.9% following a successful renegotiation. Under a full breakdown, growth falls to 0.0%. The longer-term effects do not completely disappear as companies adjust. Oxford Economics expects weaker exports, lower investment and slower productivity growth to leave Canadian GDP below the status-quo path even in 2035. Canadian exports are projected to be about C$49 billion, or 6.2%, below the status quo by that year under the breakdown scenario. That makes the issue bigger than one difficult year: the modelling suggests disrupted investment and supply chains could leave a lasting economic scar.

Manufacturing Would Be at the Centre of the Damage

Few sectors illustrate Canada’s dependence on the American market better than manufacturing. Using Statistics Canada data, Oxford Economics estimates that approximately 2.55 million Canadian jobs were directly or indirectly supported by exports to the United States in 2024. Manufacturing represented the largest group, at nearly 694,000 jobs. Professional, scientific and technical services accounted for about 378,000, while transportation and warehousing represented almost 248,000.

Those figures also explain why tariff damage can spread far beyond factory employees. Roughly 65% of bilateral goods trade consists of intermediate inputs rather than finished products, according to the report. Parts, raw materials and components routinely cross the border before being incorporated into something else. Automotive production is one of the clearest examples: the Canadian and American industries have been integrating production since the 1965 Auto Pact, with some components crossing the border repeatedly before a vehicle is completed. A tariff placed somewhere along that chain can therefore affect assemblers, parts suppliers, trucking companies, engineers, warehouses and eventually dealerships and consumers. Oxford Economics identifies autos, metals, machinery, electronics, chemicals, wood and paper products among the Canadian industries most exposed in a breakdown.

Ontario and Quebec Would Be Hit Hardest, but the Pain Would Spread Nationally

Canada would not experience a CUSMA breakdown evenly. Ontario and Quebec stand out because of their concentration of automotive, machinery and metals production. Oxford Economics estimates that Quebec’s GDP would be 1.4% below the status-quo level in 2027 under a breakdown, while Ontario would be 1.3% lower. New Brunswick is also estimated at 1.3% below the status quo, with Manitoba, Nova Scotia, Alberta, Prince Edward Island and British Columbia each around 1.2% lower.

The regional picture is important because the affected industries are tied closely to individual communities. A weaker automotive supply chain is not simply a national trade statistic for cities across southern Ontario, while disruptions to wood and paper exports carry a different significance in parts of New Brunswick. The opposite scenario illustrates the same concentration. Under successful renegotiation, Oxford Economics estimates Ontario could have approximately 56,000 more jobs in 2027 than under the status quo and Quebec about 20,000 more. Together, those two provinces would account for roughly three-quarters of the net Canadian employment increase in that scenario. Even provinces that export large quantities of energy or agricultural commodities are not completely insulated because transportation, professional services and household spending transmit trade shocks across provincial borders.

Households Could Feel the Breakdown Through Both Jobs and Prices

Trade disputes can seem distant until they begin affecting household budgets. Oxford Economics estimates Canadian inflation would reach 2.6% in 2027 under the breakdown scenario, compared with 2.2% under the status quo. The mechanism is relatively straightforward: tariffs increase the cost of imported goods and production inputs, while businesses can pass some of those additional expenses on through higher prices. Integrated supply chains can magnify the effect when materials cross borders multiple times.

At the same time, weaker employment and investment would put pressure on income growth. The report estimates Canadian real disposable-income growth of only 0.6% in 2027 under a breakdown, versus 1.2% under the status quo and 1.7% after successful renegotiation. Across the 2026-to-2035 period, Oxford Economics estimates the breakdown scenario would reduce average Canadian household income cumulatively by C$5,987 relative to the status quo. Comparing the successful-renegotiation scenario directly with a breakdown produces an estimated difference worth about C$846 per Canadian household each year. The Bank of Canada has separately warned that higher import costs, counter-tariffs and supply-chain disruption can raise consumer prices even while weaker economic demand pulls in the opposite direction.

The United States Would Also Pay a Significant Economic Price

Canada would suffer the larger proportional shock because its economy is considerably more dependent on the bilateral trading relationship, but Oxford Economics does not portray a CUSMA breakdown as an American victory. Its modelling estimates the United States would have approximately 214,000 fewer jobs in 2027 than under the status quo. Cumulative U.S. GDP would be roughly US$1.04 trillion lower between 2026 and 2035, while U.S. exports would be about US$150 billion lower by 2035.

The findings reflect just how interconnected the two economies have become. Bilateral goods and services trade reached approximately US$917 billion in 2024, according to figures used in the report. Canadian materials are also embedded in U.S. production rather than simply competing with it. Steel, aluminum, energy and other intermediate inputs feed American factories, meaning tariffs can increase costs for companies that policymakers are attempting to protect. The report consequently finds U.S. manufacturing output weaker under a breakdown, with metals, machinery, autos and transportation equipment among the exposed industries. The United States also runs a sizeable services surplus with Canada; USTR figures show American services exports to Canada reached US$90.3 billion in 2024, compared with US$57 billion of services imports.

CUSMA Has Not Ended—But Businesses Now Face Annual Uncertainty

The failure to secure a long-term extension on July 1 did not terminate CUSMA. The agreement remains in force, and existing rules continue to operate unless the parties withdraw or reach new arrangements. Under CUSMA’s review mechanism, the absence of agreement on an extension means the three countries can return to the negotiating table annually until an extension is reached or the agreement reaches its current 2036 expiry date. That is very different from the full breakdown modelled by Oxford Economics.

Still, uncertainty has become part of the economic problem. Investment decisions involving factories, supply networks and major equipment often stretch across many years, making annual questions about future market access difficult for companies to ignore. The political negotiations also remain active. On August 11, Canadian Minister responsible for U.S. trade Dominic LeBlanc was scheduled to meet U.S. Trade Representative Jamieson Greer alongside Canada’s chief trade negotiator, Janice Charette, as Ottawa seeks to prevent additional U.S. tariffs and advance a broader agreement. The Oxford Economics report therefore does not describe an outcome that has already happened. It puts an estimated price on what could happen if the current dispute moves from prolonged uncertainty to an outright dismantling of the North American trade framework.

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