Canada's Economy Could Lose $402 Billion if US Exits CUSMA

A new report from Deloitte Canada estimates that if the United States were to withdraw from CUSMA, Canada's economy would take a significant hit. According to the report, an American withdrawal would result in an economic output loss of $402 billion over the next decade and translate into 163,000 fewer jobs per year.

The report assumes that the U.S. formally withdraws from CUSMA, ending tariff exemptions across the board and resetting trade to World Trade Organization minimum rates. This scenario would lead to a real GDP drop of 1.6% by 2036 compared with keeping CUSMA intact, resulting in lost output worth $402 billion over the decade.

Manufacturing sectors, including motor vehicles and parts, electronics, machinery and equipment, rubber and plastics, and chemicals, would be hit hardest. Canada's oil and gas industry would also feel the heat, with a potential 11% decline in oil exports to the U.S. and a 30% drop in natural gas exports.

However, Deloitte analysts note that trade diversification could offset roughly a third of the job losses, not all of them. The report suggests that Canada's internal trade is another overlooked lever, with fully phasing out interprovincial trade barriers over five years potentially adding $881 billion in economic output by 2040 and creating 133,000 jobs.