06:52 AM EDT, 04/03/2025 (MT Newswires) -- United States President Donald Trump late Wednesday announced sweeping reciprocal tariffs on imports and the levies are more punitive than what markets had anticipated, said Desjardins.

U.S. Tariffs will be as high as 50% on goods sent from nations that are deemed to have high trade barriers. For major trading partners, though, China tops the list, with imported goods from that country facing 34% duties. Other major trading partners will generally see tariff rates of 20%-25%. These tariffs stack on top of some, but not all, of the earlier announced increases in rates.

The big story for Canada is that the country and Mexico won't yet be subject to the reciprocal tariffs.

According to the factsheet published by the U.S., for both countries, "the existing fentanyl/migration IEEPA orders remain in effect, and are unaffected by this order. This means USMCA-compliant goods will continue to see a 0% tariff, non-USMCA-compliant goods will see a 25% tariff, and non-USMCA-compliant energy and potash will see a 10% tariff. In the event the existing fentanyl/migration IEEPA orders are terminated, USMCA compliant goods would continue to receive preferential treatment, while non-USMCA compliant goods would be subject to a 12% reciprocal tariff."

As a consequence, Canada and Mexico can keep further retaliatory actions on hold and potentially work constructively with the U.S. Administration towards a broad trade agreement, stated the bank.

After being hit hard earlier in the year, Canada and Mexico have seemingly received at least some short-term advantages over other trading partners. Should producers in both countries move to make more of their goods USMCA-compliant and the governments work towards resolutions for border frictions, there is scope for Canada and Mexico to take market share from other U.S. trading partners, according to the bank.

That reinforces the view of Desjardins that the Bank of Canada won't cut rates later this month unless the market selloff is sustained.

Despite the reprieve given to the two North American economies, this is a very significant structural shift in policy, added the bank. The U.S. effective tariff rate could be headed to its highest level in a century. U.S. financial markets are concerned about the magnitude and scope of Wednesday's announcement.

In addition, there remain unresolved trade "irritants" with both Canada and Mexico that may be hard to overcome, pointed out Desjardins. Markets may, however, cling on to the hope that Wednesday's announcement is just the starting point for bilateral negotiations with individual trading partners and tariff rates will fall if international trade barriers decline.

Whether or not that theory proves true will be key to the trajectory of markets in the coming weeks, concluded Desjardins.