Alberta’s 2025 budget lays out three possible economic outcomes amid looming U.S. tariffs, with the province forecasting a baseline moderate trade conflict, a worst-case scenario involving widespread tariffs, and a best-case scenario where tariffs are avoided but uncertainty lingers.
The province warns that Alberta’s economic trajectory, job market, and revenue outlook hinge on how U.S. trade policies unfold in the coming months while U.S. President Donald Trump has provided mixed messages about the tariff implementation date.
Tariffs were mentioned in nearly every section of the province’s fiscal plan.
The baseline projection, which Alberta used for budgeting, assumes Canada will face 15 per cent tariffs on all goods, except for energy, which will see 10 per cent tariffs.
The province stated that it does not have insider information beyond what is publicly available but determined that the baseline projection reflects the most reasonable expectation.
“The evolving situation with Canada-U.S. trade relations is bringing more uncertainty to the province’s revenue forecast,” reads the fiscal plan.
The $5.2 billion deficit projected by the Alberta government for 2025-26—expected to shrink in subsequent years—is based on the baseline projection of 15 per cent tariffs.
Another alternative was presented by the provincial government. If 25 per cent tariffs are put on all Canadian goods, except for the 10 per cent on energy products, Alberta projects a deficit of $8.7 billion in 2025-26, which would still fall in subsequent years. The province deemed this the low scenario, meaning low growth.
The high scenario, assuming no tariffs, still projects a deficit as the looming threat would negatively affect the market. In this scenario, the provincial government projects a $2.9 billion deficit in 2025-26, almost becoming balanced by 2027-28 with a deficit of $200 million.
While Alberta’s oil sector remains relatively resilient, the manufacturing and agriculture industries are expected to bear the brunt of higher tariffs and retaliatory trade barriers.
“Unlike energy products, manufacturing goods tend to be more responsive to higher prices because of the ready availability of domestic substitutes in the U.S. As a result, real manufacturing exports are forecast to decline this year,” reads the fiscal plan. “Over the medium term, exports are expected to gradually recover as companies find alternative markets and supply chains adjust. The impact will also be buffered by a weaker Canadian dollar.”
Nominal GDP is expected to grow under both the baseline and high scenarios but decline in 2025 under the low scenario.
The low scenario would also see Canada retaliate by targeting a broad range of U.S. consumer goods.
The province warned that this scenario would worsen inflation, devalue the Canadian dollar, and significantly weaken Alberta’s exports. The budget warns that business investment will decline, and the province’s deficit could deepen further as corporate and personal tax revenue take a hit.
“Higher tariffs make Alberta’s exports to the U.S. less competitive, leading to a decline in the volume of exports, particularly of manufacturing products,” reads the fiscal plan.
The high scenario predicted more net interprovincial migration, greater wage growth, higher employment growth, and a lower unemployment rate.
Despite the challenges, the province remains confident that its low tax rates, strong energy sector, and growing population will help it weather economic headwinds.
While the government is budgeting under the assumption of moderate tariffs, the province notes that shifting U.S. trade policies could quickly change Alberta’s fiscal reality.