07:33 AM EDT, 04/03/2025 (MT Newswires) -- Both the Canadian dollar (CAD or loonie) and Mexican peso (MNX) are stronger early Thursday against the US dollat (at C$1.412, or 70.8 cents US, and MXN20.0), as Canada and Mexico were the only two countries not subject to even the minimum 10% reciprocal baseline tariff set by the United States Wednesday, said Bank of Montreal (BMO).

The much lighter-than-expected touch on retaliatory tariffs opens the door for a possible upgrade to the bank's Canadian gross domestic product growth outlook of just 0.5% this year, with two quarters of contraction. As it stands, apart from the 25% duties on steel and aluminum-and, effective today, a roughly 13% levy on motor vehicles -- after accounting for the exemption on U.S. content --Canada will pay tariffs only on a relatively small share of shipments to the U.S. that cannot be made USMCA compliant.

Still, Canada's economy isn't out of the woods by any stretch of the imagination, stated BMO. The auto industry will take a body blow, with Stellantis already announcing a two-week shutdown of its Windsor plant.

In addition, President Donald Trump is seeking more sectoral duties, including on lumber, copper and pharmaceuticals. Piling on, it's never a good thing when demand in your major trading partner is at serious risk of pulling back, pointed out the bank.

Canada will release its international merchandise trade figures for February at 8:30 a.m. ET Thursday. The merchandise trade surplus is expected to narrow to $3.5 billion in February, after spiking to a near three-year high of $4.0 billion as exporters raced to get ahead of U.S. tariffs, added BMO.

An outright decline in exports could contribute to a GDP contraction in Q2, according to the bank.