12:23 PM EDT, 04/03/2025 (MT Newswires) -- The Toronto Stock Exchange is down 715 points as markets reel after the April 2 tariffs announcement by U.S. President Donald Trump.

The tech sector, down 8%, is the biggest decliner, followed by miners, down 6.5%. Energy is also sharply lower, down 5.6%.

RBC Economics in an overnight note said the U.S. reciprocal tariffs announced were large and broad-based, but did exempt Canada and Mexico ("at least for now") through CUSMA-/USMCA- compliant trade. It noted the announcement included a baseline 10% minimum tariff rate for all countries as of April 5, but with substantially higher tariff rates imposed on specific countries to follow on April 9th -- particularly for those that make up the bulk of the U.S. trade deficit.

RBC noted tariffs on imports from Canada are still set to rise on Thursday. Auto tariffs announced last week will still push the average U.S. tariff rate on imports from Canada to about 3.5% from 2.5% by its count. "That increase will still matter, but looks small now compared to dramatically higher tariffs set to be imposed on other countries," the bank said.

According to RBC, a lower tariff rate increase is positive for Canada on a relative basis, and it eliminates what had been a growing incentive for U.S. importers to purchase goods from other regions. But, it noted, that will be little consolation if overall tariffs are large enough to shrink U.S. demand and the total U.S. import market overall. RBC said: "Prior tariff announcements have been significantly altered or rolled back days (or even hours) after, and there is a big possibility that tariffs announced today will look different a week from now. But, if the measures today are implemented, it would push the average U.S. import tariff rate to over 20%, according to our estimates, the highest rate in more than a century."

RBC said with or without additional tariff measures, trade uncertainty is threatening to slow consumer and business spending. Its tracking of Canadian consumer spending is holding up significantly better than consumer confidence so far. And, it noted, motor vehicle sales spiked higher in both Canada and the U.S., likely in part as consumers rushed to get ahead of possible auto tariff hikes. But, RBC expects business investment will remain weak regardless of additional tariff measures.

Elsewhere, National Bank said while the tariffs announcement is "undoubtedly bad news for the global economy", Canada and Mexico, as USMCA partners, were "largely spared" from the new tariff list. It added that tariffs imposed for border security-related issues may eventually be replaced by the 12% reciprocal tariff on non-compliant goods.

National Bank noted: 40% of Canadian exports are already USMCA-compliant, and this figure could potentially double following the completion of compliance recognition processes; As a result, Canada's exposure to new tariffs remains "relatively limited", primarily affecting steel, aluminum, and the automotive sector.

National Bank said: "While it is impossible to calculate an exact figure, given the unknown share of USMCA, compliant versus non-compliant goods by product category, as well as the proportion of U.S.-made components in Canadian assembled vehicles, we estimate that, under the current measures, the effective trade-weighted tariff rate on Canadian exports remains below 5%. However, this short-term relief may be fleeting. The breadth and severity of tariffs imposed on other countries significantly heighten the risk of stagflation in the United States and raise the likelihood of a global economic slowdown or recession. Unless the U.S. administration reverses course, the Canadian economy remains on track for a noticeable deceleration throughout the remainder of 2025."

Meanwhile, CIBC said the "tariff front-running boost to exports reversed sharply in February", causing Canada's trade balance to swing into a deficit of $1.5 billion in that month, according to data released today. CIBC noted that was in contrast to the consensus expectation for a $3.5 billion surplus, relative to a $3.1 billion surplus in January (revised down from $4.0bn).

Looking ahead, CIBC said although USMCA goods were exempt from tariffs in March, U.S. businesses appear to have accumulated enough inventory in prior months, and exports will remain under pressure as a result.