Trump tariffs could throw off Ford’s path to balanced Ontario budget

U.S. President Donald Trump’s chaotic trade war will loom large over Doug Ford’s provincial budget, with experts saying billions in financial aid to impacted workers and businesses will throw a wrench in the premier’s plan to balance Ontario’s books next year.

Next month, Ford’s Progressive Conservatives are expected to unveil their first budget since winning a third-straight majority government in February. The spending plan could be announced in the days after Finance Minister Peter Bethlenfalvy is scheduled to deliver a key speech to a business audience in Toronto on May 12.

But the spending plan will drop at a time of uncertainty, as the impact of Trump’s tariffs on the auto and steel sectors continues to deepen. This week, Ford himself conceded that his government has to weight its priorities carefully in this moment, hinting that balancing the books may not happen.

“There’s a time to make sure that we balance and there’s times that we see that there might be a few billion dollars more to protect communities,” he said.

As recently as last fall, the Ford government said it would balance Ontario’s books by the 2026-2027 fiscal year. It had projected a $1.5 billion deficit in this spring budget, followed by a surplus of just under a billion dollars the following year.

But those figures were part of government calculations before Trump imposed tariffs on Canada, resulting in layoffs at home and heightening fears of a recession. During the snap provincial election, Ford promised tens of billions in financial aid and stimulus for affected workers and businesses. 

Conservative strategist Laryssa Waler said she expects a focus on further tariff response, but balancing the budget next year is unlikely.

“I would look for quite a bit of spending, especially in the face of tariffs,” she said. “I think that it’s a reasonable expectation to conclude that a path to balance might be impacted by extra spending that needs to occur because of the tariff war.”

Pandemic spending could be similar to tariff response, strategist says

Waler, who is founder of Hensley Strategies and a former Ford staffer, said Ontario’s approach to pandemic spending is likely the closest comparator to the strategy for this budget.

“You’ll see the Ontario government almost scenario plan,” she said, calling for different degrees of response depending on the tariff impacts. 

The government recently announced $11 billion in tax deferrals and support to help businesses affected by tariffs. Liberal strategist Charles Bird said he expects Ford’s plans to balance the books next year are out the window. 

And in light of Trump’s tariffs, he doesn’t think the premier will pay a political price.

“People do not give a hoot about deficits at the moment,” he said. “I think they understand that this is not the time for radical cuts to government spending.”

Bird, who is a principal at Earnscliffe Strategies, anticipates the government will set specific reserve funds aside as possible tariff contingencies, instead of rushing targeted spending out the door.

“There will be some desire to keep some portion of reserves available should further imposition of tariffs … prove really detrimental to our economic interests,” he said. 

Trade war could have long-term consequences for Ontario’s books: prof

The real effect of a prolonged trade war with the U.S. may not be felt until next year’s budget, said Trent University political science professor Cristine de Clercy. The need for spending constraints to keep Ontario’s credit rating in check and billions in borrowing costs down could lead to difficult choices for the government at that point, she said.

“I have a hard time seeing anything but a very austere fiscal future for us here in Ontario,” she said.

Ford’s government swept to power in 2018, promising to bring fiscal discipline to the province’s books and balance the budget. But at this point, the Tories have not presented a balanced spending plan. 

However, the Ford government did achieve balance in the 2021-2022 fiscal year, reporting a $2.1 billion surplus because of higher than expected revenues. The government had initially projected a $13.5 billion deficit for that year.

Former Liberal cabinet minister John Milloy said he expects support for workers and businesses in the budget. But the government will need to look for offsets in other places to fund them because running large deficits year-over-year becomes a problem over the long-term, he said.

“That money is going to have to come from somewhere, and it’s going to have to come from saying no to some other priorities,” said Milloy, who is now the director of the Centre for Public Ethics at Martin Luther University College.

Milloy said he wouldn’t advocate for “an absolute zero” approach to running a deficit in this budget, but taking a hard look at things like health care and education funding might be necessary in the coming years.

“I know that’s something that no one likes to talk about, but health care cannot continue to grow at the rate it’s growing,” he said.