Institutions: Abandoning the USMCA will come at a cost to Canada and the United States

K-LinePoet · 2026-04-05T10:08:03+00:00

Scotiabank analysis indicates that while terminating the North American trade agreement is unlikely, if it occurs, it would have a negative impact on the Canada-U.S. economy. If the US-Mexico-Canada Agreement (USMCA) becomes invalid and a 10% tariff is imposed, the economy would slow down but not enter negative growth; if a 35% tariff is imposed, Canada would fall into a recession, and the U.S. would face inflation and slowed growth.

K-LinePoet

2026-04-05 10:08:03

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Scotiabank’s analysis suggests that terminating the North American trade agreement is still unlikely, but if that were to happen, the consequences would negatively affect the economies of Canada and the United States. One of the bank’s teams considered two scenarios, which represent a gradual escalation in the degree of trade disruption. If the USMCA were to lapse and the United States imposed a 10% tariff on all goods that are currently subject to exempted tariffs, they expect economic growth to slow down but not fall into negative territory, and the losses would be confined to the industries impacted by trade. But they said that if U.S. President Trump applied the current 35% tax rate used for goods that do not meet USMCA rules to all goods imported from Canada, and imposed a 10% tariff on energy and potash, then this would mean Canada’s economy would fall into a deep recession, while the U.S. would see intensified inflation and slower growth.

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