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Alberta projects C$5.2-billion budget deficit if Trump tariffs proceed

Alberta, Canada's oil producing province, forecasted a deficit of C$5.2billion ($3.5billion) for fiscal 2025/26 if U.S. Tariffs were implemented. This would result in a decrease of government revenues as well as slowed economic growth.

The outlook shows a dramatic change in Alberta's financial health following a budget surplus of C$5,8 billion expected for the current fiscal period. It also illustrates the uncertainty Canadian policymakers face as they deal with the tariff situation.

How can you plan a budget with so many unknowns? What will the U.S. President say or not say over the next few days, weeks, and months? Nate Horner, Alberta's finance minister, told reporters.

The province's revenue forecast for 2025-2026 was C$74 billion. This is C$6.6 billion less than the C$81 billion third quarter forecast in 2024-25, due largely to lower oil prices and royalty payments.

After growing by an estimated 3% in the past year, it said that its Gross Domestic Products growth will slow to 1,8% in 2025, and to 1,7% in 2026.

Alberta also said that it forecasts deficits of C$2.4bn and C$2.0bn for fiscal years 2026/27/2027/28.

Alberta's annual budget document reflects its expectations of a "moderate" U.S. - Canada trade conflict, which could include tariffs and retaliatory actions.

Horner explained that Alberta's budget was based on the analysis that a tariff of 25% would not be sustainable for the U.S. Economy. Instead, the province is looking at a 15% tariff average for the year for most goods, and 10% for oil.

He said that Alberta does not know what U.S. president Donald Trump will do, beyond what he's publicly stated. The province makes its "best guess and most reasonable" as to what it faces.

Trump has proposed that a 10% tariff be implemented on all U.S. crude oil imports from Canada, and a 25 percent tariff on other Canadian goods starting March 4. Canada responded by announcing that it would impose tariffs of C$155 billion on U.S. products.

There has been some confusion regarding the timing and duration of the tariffs.

The province warned that if a 25% tax was imposed on all non-oil products, Alberta's revenue loss would be greater and its deficit could reach C$8.7billion in 2025/26.

Alberta's budget shows that without tariffs, its deficit would be C$2.9billion. The province's finances are also being affected by lower global oil prices, a dramatic increase in population, and a new tax reduction.

Alberta's economy is heavily dependent on oil prices because of its oil sands reserves.

Tariffs are expected to widen the discount between Canadian heavy crude and the benchmark West Texas Intermediate crude in the United States. The discount is projected to increase to $17.10 a barrel on average in 2025/26 from $13.20 a barrel in 2024-25.

Alberta said, however, that its energy sector was well-positioned to meet this challenge. This is in part because a weaker Canadian Dollar will help cushion the impact of tariffs. Alberta oil is sold in U.S. Dollars, so a weaker Canadian dollar increases the value for Canadian oil producers.

The report said that other sectors like agriculture and manufacturing will be more adversely affected by tariffs. Consumers are expected to also be more cautious.

Alberta announced that it would double its annual contingency funds from C$2 to C$4 billion. This will give the province more flexibility in dealing with what it calls "increased uncertainty" on the economy. (Reporting and editing by Caroline Stauffer, Marguerita Choy, and Amanda Stephenson)

(source: Reuters)