Ontario Budget Deficit Grows as Province Fights U.S. Tariff Effects
Ontario’s financial outlook got worse this week after the government shared a new budget aimed at helping workers and businesses deal with the problems caused by U.S. tariffs.
Finance Minister Peter Bethlenfalvy said the province’s deficit for the 2025–2026 year is now expected to reach $14.6 billion, much higher than the earlier prediction of $4.6 billion. The following year will also see a larger deficit of $7.8 billion instead of a small surplus. Ontario now hopes to balance the budget in 2027–2028.
RBC Economics: Debt Still Under Control, But Challenges Ahead
Rachel Battaglia from RBC said Ontario ended the 2024–2025 year better than expected, with a $6 billion deficit instead of the predicted $9.3 billion. But the good news stops there.
Because of U.S. tariffs, the province had to delay its return to a balanced budget. Revenues are expected to drop 0.8% next year, partly due to tax cuts meant to help the economy.
The budget includes a $200 billion infrastructure plan over the next 10 years, mainly for public transit, highways, and hospitals. RBC said Ontario is still meeting two of its three key financial targets, but one—net debt compared to revenue—will go over the limit in 2025–2026.
TD Bank: Economy Is Uncertain
TD Bank’s Rishi Sondhi said revenues are likely to fall because of a weak economy. Ontario’s $14.6 billion deficit is in the middle range compared to other provinces.
Sondhi warned that Ontario is in a risky spot due to its exposure to tariffs and fewer newcomers as a result of federal immigration changes. The budget includes different possible economic outcomes—one with better growth if tariffs ease, and another where tariffs stay high and hurt the economy.
Gas tax and manufacturing tax breaks will cost Ontario over $1.2 billion this year. Interest payments on debt will rise to $16.2 billion. The province is also creating a $5 billion fund to support businesses.
Sondhi said balancing the budget by 2027–2028 will be tough since it depends on keeping spending very low.
National Bank: Ontario is Playing Offense and Defense
Economists from the National Bank of Canada said the budget is focused on helping the province get through the U.S. tariff problem. They said the deficit for 2025–2026 could range from $12.3 to $17.6 billion depending on what happens.
They praised the province for being careful with its estimates and for creating backup funds in case things get worse. They also said Ontario plans to support businesses by cutting costs and deferring some taxes, which will help them keep workers even if the economy weakens.
