Quebec unveils its tariff-ready budget with a ‘historic’ $13B deficit

Finance Minister Eric Girard says this year’s budget was his most complex yet, with Trump’s tariffs threatening Quebec’s economy.

Faced with the uncertainty of U.S. tariffs and the impact on the Quebec economy, the François Legault government is spending more than $12 billion to stimulate wealth creation and stave off a possible recession.

It’s part of the $165 billion in spending in the 2025-2026 budget announced on Tuesday in Quebec City.

Overshadowing the rocky financial outlook is the trade war with the United States, which the government expects will slow economic growth in GDP by 0.7 per cent over the next two years.

The government is making these projections on the assumption that U.S. tariffs could fluctuate and will be in place for around for two years.

Quebec’s gross debt stands at $258.4 billion. The 2025-2026 budget forecasts a staggering deficit of $13.6 billion, or 2.2 per cent of GPD, which is one of the biggest in Quebec’s history. The deficit takes into account the required contribution to the Generations Fund, a fund dedicated to balancing the budget.

Quebec Finance Minister Eric Girard told reporters this latest budget – his seventh – “was the most complex” one he has overseen, mainly because of the uncertainty around the trade war with the U.S. The word “tariff” appeared no less than 161 times in the 458-page budget document, signaling Quebec’s preoccupation with the Canada-U.S. relations on the economy.

“The risk is there” for a recession in North America, not just in Quebec, he said, pegging the probability of one happening at about 40 per cent.

To shield Quebec from the effects of the trade war with the U.S., Quebec is spending $4.1 billion over five years to support the economy. This includes “transitional assistance” for businesses affected by the tariffs in the form of loans and measures to help consumers identify Quebec products.

Quebec is also taking steps to reverse what it says is a “downward trend in business research and development” by introducing a new tax credit for research, innovation, and commercialization, providing just over $275 million over five years. The tax relief intends to put Quebec in a better position to boost wealth creation – one of the ways the province hopes to bring down the deficit, which eclipses last year’s massive budget shortfall of $11 billion.

The government has vowed to balance the budget by 2029-2030 “at the latest.”

To achieve this, the government says it has done a review of across-the-board expenditures to find $3 billion in savings over the next five years in the tax system, including the elimination of tax credits the government says were inefficient.

It’s doing this while also investing $3.9 billion in health care and social services and $1.1 billion in education.

The budget has also earmarked $228.0 million over three years for funding the maintenance of the low-rental housing stock and commits to building 23,000 housing units by 2029.

There is also money set aside for Quebec’s English-speaking community – $10 million over five years to improve access to health and legal services. Part of that funding is meant for “expanding the supply of community mental health services for a population experiencing higher levels of psychological distress and anxiety than the general population.”

There are no tax hikes on the horizon.

Opposition parties and interest groups say the “historic” deficit is out of control and raises many concerns about taxpayers’ pocketbooks.

The enormous deficit is “a significant failure,” according to Quebec Liberal Finance Critic Frederic Beauchemin, who accused the provincial government of throwing money around with no guidelines. “Typical of the CAQ,” he told a press conference.

The Canadian Taxpayers Federation (CTF) called it an “unsustainable” budget.

“Government spending is exploding while the economy stagnates,” said Nicolas Gagnon, Quebec director of the CTF. “Legault and Girard need to cut up the credit card and bring back fiscal discipline instead of driving Quebec deeper into debt.”