The Canada-U.S. Economic Relationship: What You Need to Know Ahead of the November 5 Presidential Election

Whether you’re an American politics devotee looking for a refresher or you’re in the very specific situation of not knowing a lot but wanting to keep up with your friends, family or coworkers as they discuss the implications of the upcoming U.S. presidential election on Canada’s economy… well then, this blog is for you!

We’ve pulled together the various content we’ve published in the past year on Canada-U.S. economic relations to give you a quick primer ahead of November 5.

CUSMA

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Canada, the United States and Mexico share one of the largest trading relationships in the world, jointly accounting for almost a third of global gross domestic product (GDP). This critical economic partnership among the three North American economies is underpinned and enabled by the Canada-United States-Mexico Agreement (CUSMA), a free trade agreement that took effect in March 2020, replacing the North American Free Trade Agreement (NAFTA). 

On July 1, 2026, Canada, the United States and Mexico will decide whether to extend CUSMA for a new 16-year term. If they choose not to, there will be a review every year until the Agreement terminates in 2036. Worryingly, there is growing bipartisan consensus in the United States on “Buy American” protectionist policies that is at odds with CUSMA’s goal of North American economic cooperation. Regardless of whether a Democrat or a Republican president occupies the White House when the CUSMA review happens, there is a risk that the United States will seek changes to CUSMA that are detrimental to the interests of Canada and Canadian businesses. 

Related Content

• Read our submission to Global Affairs Canada regarding CUSMA 2026 Joint Review.
• Read “Policy Matters: Why It’s Time to Care about CUSMA”.
• Read our submission to the Standing Committee on International Trade regarding CUSMA 2026 review and related trade irritants.
• Read “What if Harris wins the U.S. election and Poilievre wins in Canada? How the ensuing tension could hurt Canada’s economy” in the Toronto Star.

Canada-U.S. Trade

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Trade between the United States and Canada goes far beyond the buying and selling of physical goods — our economies are intertwined in a complex web of supply chains across many sectors. Which is why a 10% across-the-board tariff on United States imports, like what President Trump is promising, would significantly impact trade flows, productivity, prices and real income levels in both Canada and the United States.

The potential consequences:

• Canadian labour productivity would drop by nearly 1%.
• Almost $1,100 per person would be lost in real annual income for individuals in Canada and the United States.
• For Alberta, Manitoba, Ontario and New Brunswick in particular, trade with the U.S. accounts for a significant portion (41% or more) of GDP. On the other side of the border, Canada is the main exporter to over 20 states. This flow of trade would be severely impacted by tariffs and the GDPs of many provinces and states would take a hit.

In an era of increasing global supply chain disruptions, Canada’s role as a stable and dependable trade partner is more critical than ever. Trade with Canada not only bolsters American productivity but also ensures that U.S. businesses have access to high-quality resources vital for their operations. By maintaining and strengthening trade ties, both Canada and the U.S. can secure long-term economic stability, enhance productivity, and remain globally competitive.

To safeguard this essential trade relationship, Canada and the United States should pursue trade policies that:

• Promote growth for firms on both sides of the border
• Prevent retaliatory measures that could harm both economies
• Prioritize long-term agreements for economic resilience
• Steer clear of short-term, reactionary policies
• Continue to support the principles of free trade
• Promote free trade

Related Content

• Read Partners in Prosperity: Exploring the Significance of Canada-U.S. Trade, a report from BDL and Trevor Tombe.
• Read the report’s press release.
• Read our statement regarding the Prime Minister’s announcement on NATO defence spending commitment.

The Digital Services Tax

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The Digital Services Tax is a retroactive tax on revenue earned by large foreign and domestic businesses on online services, including marketplaces, advertising and social media. Canada’s implementation of this tax is souring diplomatic and economic relations with the United States, as well as affecting our relationships with other countries who have signed onto the multinational agreement that Canada is now undercutting.

The United States, our biggest trading partner, is strongly opposed to unilateral digital taxes like the DST. A recent announcement by the USTR says that the DST “appears to breach Canada’s commitments under [CUSMA].” The announcement goes on to say that “Canada appears to have targeted its DST on U.S. companies providing Canadian digital services and to be discriminating against U.S. companies and in favor of Candain companies providing those services.”

When France imposed a digital services tax, the United States implemented 25% tariffs on products unrelated to digital services, ranging from champagne and cheese to handbags and perfume. Similar retaliatory tariffs in Canada could result in huge price increases for Canadian goods that are exported to the United States and empty shelves in Canada as businesses with cross-border manufacturing and supply chains struggle to produce products amid the tariffs.

To put it into perspective, our trade with the United States was valued at $960.9 billion in 2022, with $2 billion worth of trade crossing our land border every day, whereas the most generous estimate for how much the DST will earn is less than $1.5 billion per year over the next five years. At such a sensitive time in our trade relationship, Canada should be looking to minimize trade irritants with the United States, not increase them.

Related Content

• Read “Costing You More…5 Ways the Digital Services Tax Will Impact You”.
• Read our statement on the USTR announcement.
• Read our letter to Minister Anand, President of the Treasury Board, regarding the DST.