The Denominator Problem: What CUSMA Is Actually Worth  ·  Part 1 of 4

The Denominator Problem

On July 1, two governments walked out of the same virtual meeting and published verdicts that point in opposite directions. Ottawa: the agreement “remains fully in force until 2036 and can be renewed at any time for another 16-year period” (Statement by Minister LeBlanc, July 1, 2026). Washington: “The United States did not agree to renew the USMCA in its current form. As a result, the USMCA is not renewed” (Ambassador Greer statement, USTR, July 1, 2026).

Both statements are accurate. Neither tells you what the agreement is worth, because neither says what it is measuring the agreement against. That gap is not a diplomatic nicety. It is the whole problem. Every claim you have read about who won or lost under CUSMA (USMCA in US usage), from any of the three capitals, is a fraction, and the fraction has no meaning until someone picks the denominator. Most public discussion has picked the worst one available. This series is about picking better, and about the strange fact that the 2025-26 tariff regime, whatever else it did, ran the natural experiment that lets us measure the agreement’s value directly for the first time in its life.

Start with the candidates.

Denominator one: realized preference value. This is the cash measure. Take the preference margin (the gap between the tariff a good pays with the agreement and the tariff it would pay without it), multiply by the utilization rate (the share of import value that actually claims the preference), multiply by the trade value. The result is dollars of duty actually avoided at the border.

The appeal is that every input is observable. The published tariff schedules give you the margin. Customs data gives you utilization and trade values. Nobody has to model anything.

Run it for 2024, the agreement’s last normal year. The US trade-weighted average MFN tariff (MFN means most-favoured-nation, the default rate a country charges imports from any WTO member it has no agreement with) was about 2.1% (WTO tariff profile, United States). About 44% of the value of US imports from Canada and Mexico entered under a claimed CUSMA preference that year (Tax Foundation, June 23, 2026). Combined US goods imports from the two countries were roughly $915 billion (US Census, Canada; US Census, Mexico). Multiply through, and remember that much of what claimed preference would have paid less than 2.1% anyway because nearly half of US tariff lines are already duty-free: you get realized savings somewhere in the mid-single-digit billions of dollars per year. Against $915 billion in trade, a rounding error.

Run the same formula for late 2025, after the tariff regime described in Part 2, and the margin is 25 to 35 percentage points, utilization is above 80%, and the annual figure is in the tens of billions per country. Same agreement. Same formula. The answer moved by an order of magnitude because the denominator inputs moved. Hold that thought; Part 2 does this arithmetic properly.

Denominator two: the utilization rate itself. In December 2024, 35.5% of the value of US imports from Canada and 49.5% of imports from Mexico entered under claimed CUSMA preference. By July 2025 those figures were 78.7% and 76.1% (Kelly, Cañas and Torres, Brookings USMCA Forward 2026, March 2026). Read at face value, the December numbers say the agreement barely mattered: most trade was not even using it.

That reading falls into the trap this series needs to disarm early, so here it is as a sidebar.

So utilization is a fine gauge of how much the preference is worth right now to the people filing the forms, and a terrible gauge of how much trade the agreement actually covers.

Denominator three: integration, measured as value added. The OECD’s Trade in Value Added data tracks where the value in traded goods is actually created, rather than counting the full sticker price of a good each time it crosses a border. On the 2025 edition’s origin-of-value-added-in-final-demand tables (2022 data), 15.4 cents of every dollar of Canadian value added ended up in American final demand ($317.8 billion of $2,056.6 billion across all destinations), and Mexico’s figure is higher still at 17.7% ($256.5 billion of $1,447.0 billion; OECD TiVA 2025 edition, FDVA tables, extracts on file). The OECD’s Canada country note reaches the same place from another angle: 25.7% of Canada’s domestic value added driven by foreign final demand, with the United States the destination for 60.2% of its value-added exports, which multiplies to the same 15.5% (OECD TiVA country note, Canada, February 2026).

This denominator measures exposure, and it explains why the stakes feel existential in Ottawa and Mexico City in a way they do not in Washington. What it does not measure is the agreement’s contribution. Canada would sell oil to the United States, and Sonora would ship vehicles north, under almost any treaty arrangement. Integration is the base on which the agreement operates, not the agreement’s output.

Denominator four: the modeled counterfactual. In 2019 the US International Trade Commission estimated that CUSMA would raise US real GDP by $68.2 billion, or 0.35%, and US employment by 176,000 jobs (USITC Publication 4889, April 2019). This is the most intellectually honest denominator, because it forces you to name the baseline. It is also the most fragile, because the number is a property of the baseline as much as of the agreement. The USITC’s baseline was NAFTA staying in force, so its estimate is the value of the changes CUSMA made, not of North American free trade. Against a baseline of MFN reversion, the number would be far larger. Against the 2025 tariff regime, larger still.

And then there is the denominator that actually governs policy: the bilateral trade balance. A country’s overall trade balance is, by accounting identity, the gap between what the country saves and what it invests. Push on it with tariffs and, unless national saving or investment moves, it squeezes back out somewhere else, in other bilateral balances, in exchange rates, in capital flows. A bilateral balance is even less informative, because it also reflects triangular trade patterns and, in gross terms, double-counts every component that crosses a border more than once inside an integrated supply chain. It can widen while an agreement performs brilliantly and narrow while one fails. It measures macroeconomics, not agreement performance.

It is also the metric in the operative documents. The February 2026 proclamation imposing the Section 122 import surcharge justified the action by the US goods trade deficit “reaching $1.2 trillion in 2024” (Federal Register, February 25, 2026). And USTR’s July 1 statement declining renewal names the measure in its closing sentence: the United States will continue to engage with Mexico and Canada “to address the Agreement’s shortcomings and our trade deficits with these countries.” One precision note, because this series should model the discipline it preaches: the USTR statement pairs deficits with shortcomings; it does not say “we scored the agreement on the deficit and it failed.” The revealed weighting is in the pairing, and in which numbers appear in the surcharge proclamation, not in an explicit declaration.

So here is the discipline the next three parts will hold to, and the standard worth applying to every CUSMA claim you encounter this year. Any statement of the agreement’s value must declare its baseline, because there are at least three and they disagree by an order of magnitude. Measured against NAFTA continuing, CUSMA’s value is the USITC’s modest 0.35% of GDP. Measured against MFN reversion, it is a preference margin of a couple of percentage points on the trade that bothers to claim it, worth single-digit billions a year. Measured against the 2025 tariff regime, it is the difference between 0% and rates of 10% to 35%, worth on the order of $150 billion or more a year across the two partners. That figure is this series’ own arithmetic, shown in full in Part 2, and no agency publishes it as a total; what distinguishes it from the modeled counterfactuals is that every input is observed customs data (trade values, claimed-preference shares, published tariff rates) rather than a simulated economy. For an external anchor of the same order, the Tax Foundation scores ending the CUSMA exemptions at $466 billion over 2027 to 2036, and that is at the lower 10-to-25-point rates its scenario assumes (Tax Foundation, June 23, 2026). The test to apply to any CUSMA value claim, this series’ own numbers included, is whether the baseline is named. The baseline is the analysis.

What made the third baseline measurable at all is that somebody actually built it. In March 2025 the preference margin jumped from roughly 2 points to 25 overnight, and every firm in North America re-ran the certification math at once.

Next in the series: Part 2, The Accidental Experiment, does the arithmetic, in public, with the assumptions on the table.

Running Glossary  ·  Terms Introduced in Part 1

Preference margin. The gap between the tariff a good pays under a trade agreement and the tariff the same good would pay without it.

Utilization rate. The share of import value that actually claims an agreement’s preferential rate. A claimed-preference measure, distinct from eligibility.

MFN (most-favoured-nation) rate. The default tariff a WTO member charges imports from countries it has no trade agreement with. The US trade-weighted average is about 2.1%.

Rules of origin. The tests a good must pass (regional content, production steps) to count as originating in the agreement region and qualify for preference.

Trade in value added (TiVA). OECD accounting that attributes trade flows to where value is created, removing the double-counting of gross trade statistics.

Section 122. A provision of the US Trade Act of 1974 allowing a temporary import surcharge of up to 15% for up to 150 days to address balance-of-payments problems. Used February to July 2026.

A note on framing: Fully Briefed synthesizes publicly available government source material and translates it into financial terms. This is education, not legal, customs, or tax advice. The arithmetic in this series states its assumptions and sources so you can substitute your own inputs; for decisions that turn on your own tariff classification, origin documentation, or contract exposure, work with your customs broker and professional advisors.

Trevor Ryhorchuk, CPA, CIA, PMP

Fully Briefed — Canadian Trade Intelligence
tradeintel.fullybriefed.ca