07:47 AM EDT, 03/31/2025 (MT Newswires) -- Wednesday is the day that the United States is expected to announce reciprocal tariffs on all its trading partners and it already loomed large over the Canadian economy, said TD.

Many questions remained, such as the coverage of countries and goods, and the size of the tariff, noted the bank. Then the Trump administration surprised markets last week with an announcement of a 25% tariff on the auto sector, scheduled to take effect this Thursday.

Many questions remain, including exactly how high the tariff will be for Canada. As of now, there are some indications that Canada and Mexico may receive a lower tariff on autos than other countries. TD expects that the full picture of U.S. tariff measures will remain somewhat in flux at least until Wednesday, and the same is likely true for any response from the Canadian government.

The bank doesn't have to wait to see some indication that tariffs are taking a toll already. After all, two weeks ago, TD saw soft retail sales and housing sales in February, the first major hard data prints for the month. Last week, the CFIB Business Barometer for March was released, and it showed that business confidence in Canada has taken a major hit, falling to the lowest in 10 years and lower than at any point during the COVID-19 pandemic. It seems businesses are bracing for a difficult year ahead.

The new Quebec provincial budget released last week underscored that these concerns are top of mind across Canada. It included measures to give relief to consumers and businesses hurt by tariffs, and to support infrastructure investment.

The Bank of Canada also released its summary of deliberations from its last interest rate cut decision. These emphasized how much tariff threats are weighing on the central bank's outlook. The BoC likely wouldn't have cut interest rates in March were it not for tariff threats and elevated uncertainty.

Friday, investors will see how the Canadian labor market has held up through March and they will receive international trade data, which may also contain some clues about how businesses have been managing the shifting trade environment.

However, all eyes and ears are going to be on Wednesday's tariff announcement and Canada's response, according to TD.