Ontario Projects $14.6 Billion Deficit in Budget Focused on US Tariffs and Economic Growth

Ontario Finance Minister Peter Bethlenfalvy tables the provincial budget at the legislature at Queen's Park in Toronto on March 23, 2023. The Canadian Press/Frank Gunn

Ontario’s 2025 budget includes support for businesses and workers hit by U.S. tariffs, new investments to grow key sectors, and a deficit three times larger than last year’s projection.

This year’s budget, dubbed “A Plan to Protect Ontario,” responds to economic uncertainty caused by U.S. tariffs with a focus on building a stronger economy through nation-building projects and the province’s “most ambitious” capital plan yet, said Finance Minister Peter Bethlenfalvy at his May 15 budget address at the legislature.

“Tariffs have created an economic challenge right across Ontario, and it is our communities who are hurting the most, Madam Speaker–but our government is there for them too,” the minister said.

“Our government’s plan to protect Ontario is designed to strengthen and support not only Ontario’s economy, but Canada’s economy as a whole by positioning us for long-term prosperity and growth,” he added.

“Madam Speaker, if not now, when?”

The new budget forecasts a $14.6 billion deficit for the 2025–26 fiscal year, up from the $4.6 billion projected in last year’s budget. The province says that while employment grew and real GDP rose by 1.5 percent last year, U.S. tariffs have caused economic and market instability, affecting the outlook.

The U.S. administration has imposed three rounds of tariffs on Canada, with exemptions for goods covered under the United States-Mexico-Canada Agreement.

Ontario’s deficit is expected to decline to $7.8 billion the following year, with a return to surplus in 2027–28, according to the province’s projections.

The budget includes financial support for businesses affected by U.S. tariffs, along with incentives to boost certain sectors such as critical minerals, infrastructure, and wine production.

The Opposition NDP said the new budget offers “little hope and no reassurance” to people facing financial hardship, including those impacted by the tariffs.

“Instead of choosing a future where workers and their families can get ahead, the government missed the mark with a budget that is full of cuts and no new investments in the services that people rely on,” NDP finance critic Jessica Bell said in a May 15 statement.

“Over the past few months, the people of Ontario have been asking themselves: Why wasn’t Ontario in a stronger position to take on these tariffs? Today’s budget offers a clue.”

Support for Businesses

To assist businesses affected by U.S. tariffs, the province will establish a fund of up to $5 billion, called the “Protecting Ontario Account,” aimed at providing immediate liquidity support to businesses that have exhausted their available funding.

The province is also deferring certain provincial taxes until Oct. 1 for businesses impacted by the tariffs, providing around 80,000 employers with nearly $9 billion in cash flow to keep workers hired, officials said.

The provincial government also plans to support manufacturing and processing businesses in Ontario by increasing the rate and expanding eligibility for a tax credit on investments in buildings, machinery, and equipment. The measure is expected to provide about $1.3 billion in cost relief over the next three years.

The budget also provides $20 million to mobilize new training and support centres to offer transition supports for more laid-off workers, including those impacted by tariffs.

The province is also launching a support program for grape growers and wineries to help increase the use of Ontario-grown grapes in wine production, according to officials.

Running through the 2029–30 fiscal year, the program will offer up to $35 million per year to eligible wineries, with total available funding of $175 million. It is expected to double the proportion of Ontario grapes in blended wine on average.

Economic Growth

As part of its economic strategy, the province is allocating over $200 billion for capital projects over the next 10 years, including $33 billion in the current fiscal year. Planned investments include $30 billion for highway expansion and rehabilitation, nearly $61 billion for public transit, about $56 billion for health infrastructure, and more than $30 billion to build schools and child care spaces.

The province also plans to invest $500 million to create a “Critical Minerals Processing Fund,” which would attract investments in the processing of critical minerals while ensuring that minerals mined in Ontario are processed in the province.

Premier Doug Ford has previously pitched Ontario as a reliable supplier of critical minerals, including during a proposal for a strategic alliance with the United States earlier this year in response to tariff threats. He outlined steps to speed up the development of these resources, such as shortening approval timelines for projects and building needed infrastructure.

Ontario produced more than $10 billion worth of minerals in 2020, according to provincial estimates.

Increasing skilled worker participation in priority sectors is also among the province’s goals, with plans to invest $1 billion over the next three years to support training organizations and build the necessary infrastructure across Ontario. This brings the total funding for this initiative to $2.5 billion.

“Whether it’s our competitive advantage in critical minerals, energy, technology, talent and our workers, or any other area, we will need to bolster our economy by investing in our powerful and promising industries,” Bethlenfalvy said at the legislature on May 15.

The province is also increasing loan guarantees for indigenous equity partnerships to $3 billion and supporting investments by indigenous communities in Ontario’s growing sectors. It is also investing $70 million over four years to help indigenous people participate in mineral exploration and mine development, and $10 million over three years for scholarships for First Nations students pursuing careers in resource development.

To support communities, the province plans to propose making its gas tax cuts permanent and eliminating tolls on the provincially owned Highway 407 East. Premier Doug Ford announced the measures earlier this week, saying that the tax cuts would save households about $115 per year, while removing tolls could save commuters up to $7,200 annually.