Ontario Budget 2025 Preview - From Promises to Reality: Exploring Ontario’s Options for a Tariff-Proof Budget

Ontario will be tabling a post-election budget amid mounting economic headwinds from US tariffs. Despite high uncertainty, several key themes are expected in the budget: revenue is likely to take a hit, while spending should rise as the government deploys resources to support crucial sectors vulnerable to the impact of US tariffs and Canada’s countermeasures. This report assesses the possible fiscal path through three potential scenarios.

A better handoff from FY2024–25 (FY2025) is highly likely, well positioning the province to weather the storm and ensuring it has the fiscal capacity to respond to tariff impacts.

Our estimates indicate that the tariff-led slowdown could result in significant revenue downside ranging from -$1B to -$4.5B in FY2026.

The government’s tariff-focused campaign platform promised up to $8B in support measures alongside other priorities such as education and training, affordability, healthcare and public safety. Altogether, these initiatives total approximately $15B that could be incorporated into operational spending.

Using three possible scenarios, we expect Ontario’s fiscal position to deteriorate due to its high exposure to US tariffs. The deficit could widen to between 0.6% and 1.2% of nominal GDP in FY2026—still well below levels seen during recent recessions—before narrowing to 0.4% to 0.9% in FY2027.

In all likelihood, Ontario should maintain its fiscal advantage over some of its peers, likely outperforming Quebec, British Columbia and possibly even Alberta in FY2026 and FY2027 under the two more probable scenarios.