U.S. tariffs loom large over Ontario’s annual budget as first look shows $16.9B deficit

Ontario’s mini-budget projects a larger than expected deficit due to tariff impacts, and pushes back the timeline to balance the province’s finances.

Ontario is forecasting a deficit of $16.9 billion for the 2026-2027 fiscal year, the province revealed in a key economic update Thursday afternoon — well above the previously forecasted deficit of $13.8 billion.

Tariffs and the ongoing trade war with the United States are one reason for the large hole in the budget, Finance Minister Peter Bethlenfalvy has said in the weeks leading up to its release. 

“The impact of U.S. tariffs, which have hit, among others, our steel, auto and manufacturing sectors, and global conflicts such as the Strait of Hormuz impacting energy prices, has led to the world awash in a sea of instability,” Bethlenfalvy said in a speech in the legislature on Thursday.

He pointed to rising gas prices, costs of goods inflating due to tariffs and economic uncertainty.”As a result, Ontario families and businesses are feeling the impacts. No doubt the world has changed,” said Bethlenfalvy.

The economic statement is the fourth time the Ford government has delayed its plans to balance to balance the budget by a year. (Patrick Morrell/CBC)

Bethlenfalvy has said Ontario has weathered the impact of tariffs better than economists had predicted, though the slower economy has affected the deficit.

He says deficits are not desirable in the long term, but are necessary in the current environment.

Last fiscal year left the province with a $13-billion deficit. 

The province previously said it’d be on track to balance the books by 2027, before the spring budget forecast saw that timeline extended to the 2028-2029 fiscal year. Now, it’s not expected to to happen until 2029-2030.

When asked about the delay, Bethlenfalvy told reporters it’s a matter of reacting to financial pressures caused by international tensions and maintaining the province’s investments in public services.

“While I’d like to balance today, I’m also a realist,” Bethlenfalvy said.

This marks the fourth time since 2024 that Premier Doug Ford’s government has pushed its target date to balance the budget by a year. Officials say that’s not ideal, but the province’s fiscal health is not in as dire shape as it was during the 2008-09 recession or the COVID-19 pandemic.

The outlook has deteriorated since the spring budget due to new U.S. tariffs, the threat of more tariffs, and the war in Iran, officials said. That instability has prompted Ontario to add $3.8 billion this year to its contingency fund, which will sit at $4.9 billion. Most of that is expected to be used by the end of the year, the officials said.

Previously announced measures in the fall economic statement include matching the federal government’s recent move to give businesses a tax break on capital investments, and billions of dollars in funding for tariff-hit sectors such as steel and auto.

“These actions are helping businesses adapt, attract investment, create good-paying jobs and strengthen Ontario’s resilience,” Bethlenfalvy said.

NDP Leader Marit Stiles called the ballooning deficit an “admission of failure,” in a news conference after the mini budget was tabled.

She said the Ford government has not been doing enough to make life more affordable for Ontarians, while increasing spending of taxpayer dollars.

Stiles criticized the Ford government’s mini budget for having a lack affordability measures while increasing spending. (Chris Langenzarde/CBC)

Stiles brought up the administration’s recent expense scandal that revealed multiple members of the provincial caucus used thousands of taxpayer dollars to pay for stays at Toronto hotels, despite living in the city.

“At every turn, this government has sold out the people of Ontario,” Stiles said a news release. “Selling them out to waste taxpayer dollars on five-star hotels, selling them out with growing deficits and cutting services, selling them out with handshake deals with lobbyists and developers.”

Jessica Bell, the NDP’s finance and treasury critic, said she was “shocked” to see the deficit increase. She criticized the decision to put billions of dollars into an emergency fund rather than use them to address overcrowded classrooms or emergency department wait times.

“Why have we got this contingency fund when we have all these necessary measures that need to be funded immediately,” Bell said.

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Bell said the mini budget fails to make it easier for people to afford rent or groceries.

“Stop wasting our money,” she said.

The fall economic statement also includes housing start projections, and it shows starts decreasing slightly this year to 64,700, down from 65,400 starts in 2025. It projects flat growth for 2027 with increases to 71,700 starts in 2028 and 75,400 starts in 2029.