Ontario, whose manufacturing-driven economy has been hit hard by new U.S. tariffs, has projected a smaller-than-expected fiscal deficit and announced new measures to support businesses and home buyers, according to its latest fiscal update released Thursday.
The province now expects a deficit of C$13.5 billion ($9.63 billion) for fiscal 2025–26, an improvement from the C$14.6 billion shortfall estimated in May. The revision reflects stronger tax revenues, although the gap remains significantly wider than the C$1.1 billion deficit recorded in 2024–25.
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Ontario anticipates a C$7.8 billion deficit in 2026–27 before returning to a modest surplus in 2027–28. The update includes a C$2 billion reserve for each fiscal year and a C$4.5 billion contingency fund.
With more than three-quarters of Ontario’s exports—such as autos, steel, and aluminum—headed to the U.S., the province has been hit particularly hard by Washington’s new duties. Premier Doug Ford recently drew criticism from U.S. President Donald Trump after airing a TV ad featuring Ronald Reagan’s warning against protectionism.
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“Tariffs are directly targeting Ontario workers and communities. Now more than ever, we must act to protect our province,” said Finance Minister Peter Bethlenfalvy.
The government expects economic growth to slow to 0.8% in 2025, unchanged from its May projection, following 1.4% growth in 2024. Growth is expected to edge up slightly to 0.9% in 2026.
To cushion the blow, Ontario plans to:
- Rebate the full 8% provincial sales tax on qualifying new homes for first-time buyers.
- Add C$100 million to a fund helping small and medium-sized businesses expand into new markets.
- Temporarily raise the manufacturing investment tax credit rate.
The province had already established a C$5 billion emergency fund in May to support firms facing severe tariff-related disruptions.
Ontario, one of the world’s largest sub-sovereign borrowers, now forecasts its net debt-to-GDP ratio to rise to 37.7% in 2025–26, up from a 13-year low of 36.2% last year. Long-term borrowing needs are projected to drop to C$42.5 billion, compared with C$49.5 billion in 2024–25.
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