Ontario Finance Minister Peter Bethlenfalvy before delivering the Ontario budget at the Queen's Park Legislature in Toronto, on May 15.Chris Young/The Canadian Press
The Ontario government is forecasting a deficit of $14.6-billion for the coming fiscal year, almost ten times larger than it predicted last fall, as the province wrestles with the impact of U.S. tariffs.
In its budget introduced on Thursday, the province blew away its previous estimate of a $1.5-billion deficit for 2025-26 from last November, which was based on economic projections predating U.S. President Donald Trump’s trade war.
But despite the red ink, opposition critics seized on flatlined funding in education and other areas and pointed to what they say are the Progressive Conservative government’s misplaced priorities, including tax cuts for alcohol.
It’s the latest fiscal plan issued by a Canadian province to show the damage the tariffs are expected to inflict on government balance sheets, with Alberta, B.C. and Quebec also among those posting ballooning deficits in recent months.
With U.S. tariffs imposed on Ontario’s large auto, steel and aluminum industries, the province’s economic picture is darkening. The government still expects some annual growth, based on a conservative reading of private-sector forecasts. But it predicts real gross domestic product will expand by just 0.8 per cent this year, half its projection from last fall.
As a result, corporate tax revenues are expected to slip. And the tariff-driven slowdown throws a wrench into Ontario’s plan to balance its books. It had predicted a $900-million surplus for 2026-27 in its fall economic statement. But it now expects a deficit of $7.8-billion in that fiscal year, and isn’t pledging a surplus until 2027-28.
Speaking to reporters, Ontario Finance Minister Peter Bethlenfalvy said the budget is a plan to protect the province in the face of U.S. tariffs and economic uncertainty – while remaining fiscally responsible.
“The U.S. tariffs, and the economic uncertainty surrounding them, highlight the underlying issues we face as an economy and a nation. Now is the time for growth and improvement,” he said. “… That’s what a responsible Conservative government looks like.”
Other provinces issued budgets earlier this year, when the impact of Mr. Trump’s tariff threats was even harder to gauge. B.C. projected a record deficit of $10.9-billion, while warning it could get even worse. Alberta said in February that it expected a $5.2-billion deficit, instead of an earlier predicted $5.8-billion surplus, but still pledged a tax cut. Quebec projected a record $13.6-billion deficit.
As usual, Ontario’s budget document includes a range of economic-outlook scenarios, ranging from zero real growth in 2025 to as much as 1.6 per cent. It also adds that “significant risks remain regarding the scale, scope and timing of U.S. trade policies.” Plus, the outlook predicts a further slowdown in housing starts, putting the province’s goal to build 1.5 million homes by 2031 even more out of reach.
The large deficit figure for this year is padded by a $3-billion contingency fund, which grows even larger in future years. The projections also include a $2-billion reserve fund each year meant to cushion the government’s bottom line. In all, the province plans to spend a record $232.5-billion in 2025-26, up from $227.6-billion last year.
The budget is being delivered nearly two months later than usual after Premier Doug Ford called a snap February election, running against the threat of Mr. Trump with the slogan “Protect Ontario.”
Ontario’s fiscal plan includes a number of measures aimed at easing the impact of job losses and the economic damage from the U.S. tariffs. Many of its provisions were either already announced or enacted or pledged in the recent election campaign.
The budget includes a campaign promise to create an “emergency backstop” fund of up to $5-billion called the Protecting Ontario Account to provide “immediate liquidity relief” for companies that are hit hard by tariffs.
The program adds to previously announced moves to provide $11-billion in relief to Ontario businesses, mostly in the form of six-month tax deferrals, and an expansion of an existing tax credit for manufacturers.
The budget pledges another $5-billion to the existing $3-billion allocated to the Building Ontario Fund, which is the province’s new infrastructure bank. The fund has so far not financed many major projects other than a handful of long-term care homes.
The budget pledges to triple to $3-billion a loan-guarantee fund meant to allow Indigenous groups to participate in energy, mining and other resource projects, with the program to be managed by the Building Ontario Fund.
Six key takeaways, from housing to tariff relief
With an eye on the mineral resources in Northern Ontario’s Ring of Fire region, the government is creating a $500-million fund to subsidize new processing plants for critical minerals. Business groups welcomed many of the budget’s moves.
The budget also charges ahead with Ontario’s decade-long $200-billion plan to build public transit, new highways and hospitals and schools.
Mr. Ford had dismissed any need to balance the books quickly this week, saying he did not agree with governments who “go in there and start slashing and burning.” But his budget does show cuts or frozen funding across wide swaths of his province’s spending over the next three years, including in education, social services and justice.
The budget projects the province’s net debt rising to just over $460-billion from $428-billion last year. The key net-debt-to-GDP ratio is also projected to climb back up slightly but still remain below Ontario’s 40-per-cent target. Interest costs, at $16.2-billion, are also up, but measured as a percentage of operating costs, they remain at near their lowest levels since the 1980s.
The budget pledges up to $280-million for new private-sector health clinics, which will perform more diagnostic tests and, as the government has previously announced, orthopedic surgeries − something opposition leaders and health care activists have opposed.
It cuts taxes and wholesale mark-up prices for craft beer, cider and premixed alcoholic beverages. But it projects lower revenues for the provincial alcohol retailer, the Liquor Control Board of Ontario, after the province spent hundreds of millions of dollars to accelerate allowing alcohol sales in corner stores last year.
The government is also planning to spend $57-million for two new police helicopters to assist with border patrols.
The document mentions the Premier’s Highway 401 tunnel idea − which experts have warned could cost more than $120-billion and would fail to improve traffic − pointing to a feasibility study that is assessing the concept. It promises legislation to make red-light and speed cameras “more transparent.”
And it highlights Mr. Ford’s move to rip out bike lanes in Toronto. The budget says the government intends to scrap lanes on Queen’s Park Crescent and Avenue Road in addition to the ones the Premier has already targeted on the city’s University Avenue, Yonge and Bloor Streets, which remain temporarily spared thanks to a recent court ruling.
But it also says the government would consider reinstating vehicle lanes but keeping bike lanes in place “where possible,” as Toronto Mayor Olivia Chow has advocated.
On its very last page, the budget says it will include proposed legislation to allow former Ontario ministers to be designated as honorary members of the cabinet. In Nova Scotia, where similar legislation is in place, they are allowed to continue to use the prefix “The Honourable” before their names.
Ontario NDP Leader Marit Stiles called Mr. Bethlenfalvy’s budget “a missed opportunity” to build a “tariff-proof future” with better-funded schools and health care and affordable housing.
“Instead, the Ford government chose more cuts, less relief and no real support for families who need help right now,” Ms. Stiles said.
Ontario Liberal Leader Bonnie Crombie said the budget was a “painful reminder” that the government has its priorities wrong: “I‘m frustrated watching yet again this Premier care more about alcohol, which is mentioned more than 100 times in the budget, than health care.”