Provinces have roughly $100B at hand for tariff relief, Desjardins estimates.
Canada’s provincial governments have enough fiscal firepower to respond to looming U.S. tariffs without supersizing their debt burdens, a new report says.
The analysis released Tuesday from Desjardins Economics predicted upcoming provincial budgets will be dominated by plans to prepare for an unknown 2025 as promised tariffs from U.S. President Donald Trump put a cloud over fiscal forecasts.
“The provinces are heading into a budget season with the type of uncertainties we haven’t seen since the pandemic,” said Laura Gu, senior economist at Desjardins, in an interview.
Desjardins projects that the provinces collectively have up to $100 billion in free fiscal firepower to put toward relief for industries and individuals affected by tariffs. The report expects a similar amount of support is available from the federal government.
Desjardins anticipates that provincial governments could deploy those funds without the net debt-to-GDP ratio across all provinces rising above 35 per cent — levels last seen during the COVID-19 pandemic.
Debt-to-GDP is a metric that broadly reflects a government’s ability to pay down debt by tracking the size of its loans against growth in the economy. Desjardins forecast that these figures would stabilize at 30 per cent across the provinces for the next two years, barring potential tariff impacts.
The magnitude and scope of possible U.S. tariffs against Canada remain uncertain. Canada secured a month-long pause on Feb. 4 after Trump signed an order for blanket tariffs on Canadian goods, though he later imposed additional 25 per cent tariffs on all steel and aluminum imports, set to take effect on March 12.
Desjardins’ baseline scenario assumes a “partial” imposition of the threatened tariffs at 10 per cent on all goods except energy, 35 per cent on steel and 25 per cent on aluminum.
Source: INVESTMENTEXECUTIVE
