Free trade's collapse could reshape Canada's economy

Canada is entering a renegotiation of the USMCA, which could affect trade with the United States; exports to the U.S. account for about one-quarter of Canadian GDP, and one model estimates GDP could be roughly 1.8% below baseline within a year if the agreement collapsed.

Canada is entering a renegotiation of the United States-Mexico-Canada Agreement, or USMCA. The process is already underway and could reshape trade ties with the United States. Exports to the U.S. account for about one-quarter of Canadian gross domestic product. Recent U.S. political statements have included threats and proposals that put the agreement's future in question. Key details: - The USMCA renegotiation process is already effectively under way. - Exports to the United States represent roughly one-quarter of Canadian GDP. - An Oxford Economics model estimates Canadian GDP could be about 1.8% below baseline within a year if the USMCA collapsed. - USMCA-compliant goods face an effective U.S. tariff rate around 6.3%, while non‑USMCA Canadian goods are subject to a 35% duty. Summary: Models and recent analysis indicate a USMCA collapse would lower GDP and weigh on investment and exports, with financial markets also likely affected. Policymakers are still negotiating the agreement and the final outcome remains uncertain. Undetermined at this time.