Bayern Munich sensation Davies broke the deadlock in the 63rd minute and Cavallini sealed the triumph in stoppage time in Toronto on Tuesday.
It was Canada's first goals against USA since the 2007 CONCACAF Gold Cup and the country's first victory over their rivals since 1985 as they stayed perfect in Group A.
The USMNT produced a merciless performance to open their Nations League campaign with a 7-0 rout of Cuba last week, inspired by Weston McKennie's 13-minute hat-trick.
However, USA were second best and struggled to keep the ball throughout the first half in Canada, where the hosts hustled the United States out of their stride.
In a half lacking rhythm, Canada should have taken the lead in the 16th minute but teenager Jonathan David wasted two big chances.
A backpass went straight to the feet of David, who was initially denied by USA goalkeeper Zack Steffen at point-blank range before firing wide of the post.
Another chance went begging for David five minutes into the second half after the 19-year-old Canadian side-footed agonisingly wide of the near post.
USA went up the other end moments later and almost took the lead against the run of play, but Christian Pulisic's tame shot was easily dealt with by Milan Bojan after being played in by Jordan Morris.
Canada finally got their goal in the 63rd minute and it was fully deserved as Davies bundled the ball over the line after USA twice failed to clear the danger.
Only Steffen stood in between Canada and a second goal after he thwarted Junior Hoilett with 19 minutes remaining as USA's dire performance continued, but Cavallini's 91st-minute goal capped a great night for Canada.
What does it mean? Canada preserve perfect record
Canada created distance between themselves and USA after making it three wins from three games in Group A. Canada are yet to concede a goal, while USA are six points adrift having played a match less in the race for the semi-finals.
Pulisic's struggles continue
It was another disappointing outing for Pulisic, who was hauled off approaching the hour mark. Already struggling for game time at Chelsea following his arrival from Borussia Dortmund, the USA star cut a dejected figure after being substituted on the back of an uninspiring display.
Canada showcase potential
Much has been made about Canada with Davies and David ushering in a new era of hope for the country. And based on Tuesday's display, the future is bright for Canada, who never gave USA a sniff.
USA and Canada will be back in action for next month's rematch in Orlando, Florida on November 15.