Quebec budget responds 'with strength' to Trump tariffs, plunges province deeper into debt

Quebec's finance regime minister on tues presented a budget that boosted government disbursal to unprecedented levels to break weather economic headwinds.

Rising in the National Assembly to present the 2025-26 budget, Eric Girard said Quebec must "respond with strength" to the threat of U.S. Tariffs. Girard, who has repeatedly touted the Coalition Avenir Québec (CAQ) government's ability to responsibly manage public finances, said now was the time to increase the spending — even if it drove the province deeper into debt.

"The deficit is evidently too high," Girard said. "It's manageable. We're dealing with it. We have the responsibility to respond to the uncertainty, to support businesses."

The government's messaging for this year's $165.8 billion budget centred around the need to invest in the Quebec economy to better position it in the face of U.S. President Donald Trump's tariff threats. Titled "For a Strong Quebec," the budget includes new investments of $12.3 billion over the next five years for "stimulating wealth creation and supporting Quebecers."

Much of that money will help businesses adapt to tariffs, invest in new projects and diversify their markets away from the U.S. But the measures are driving up the province's debt. Despite a concerted effort to reduce government administrative costs, which Girard said will generate billions in savings, government spending far outpaces revenue.

The projected deficit is ballooning to $13.6 billion and could go even higher if Trump's tariffs hit. But there is some good news, Girard said. Last year's "historic deficit" of $11 billion is only $10.4 billion thanks to a slightly better economic performance than forecast.

Speaking of forecasts, a cloud of uncertainty looms over this year's budget. With each budget, the government has to make assumptions about how the economy will perform. But this year, it has also had to take a stab at estimating just how far Trump will go with his tariffs. Quebec is estimating that tariffs will be, on average, equivalent to 10 per cent and will be in place for two years.

If they are larger — Trump's position on tariffs has fluctuated, but he has threatened 25 per cent blanket tariffs on all Canadian goods — they would very likely throw the Quebec economy into a recession and, according to the budget documents, "permanently lower Quebec's economic potential."

Opposition parties accused the government of using the trade war with the U.S. As a scapegoat for mismanaging public funds.

Parti Québécois Leader Paul St-Pierre-Plamondon said the government was using the trade war to conceal its gaffes, including its failed investment in Northvolt and the more than $1 billion spent on SAAQclic.

"All that counts," he said. "All of that brings us to a structural deficit that is very uncomfortable for the future of Quebec."

Liberal finance critic Frédéric Beauchemin called the CAQ "kings of the deficit" and said the government was spending too much all while letting public services fall by the wayside.

"This [budget] is a double failure — we have a record deficit and less services," he said.

But Girard said the budget showed the opposite. This year, the government announced a total of $6.8 billion in new money for social services, health care and education in commitments spread over six years. The new cash is evidence, Girard said, that the government was committed to improving social services. 

But health care and social services cost Quebecers $63.6 billion last year, a significant chunk of the budget. Québec Solidaire treasury critic Vincent Marissal said that, percentage-wise, the health-care spending increases for the coming years are too low and will lead to service cuts.

Girard said in his budget speech that the government had already invested "historic amounts" in health and education and now it was time to moderate spending increases, instead improving services through "efficiency and organizational gains."

The spending increases Girard announced this year will make it harder to reach a balanced budget by 2030 — something that is required by law under the Balanced Budget Act. Quebec predicts that, even without tariffs, the next couple of years could be difficult ones for the Quebec economy.

The government's strongest growth scenario predicts the economy to grow by less than two per cent per year for the next five years. If the full 25 per cent tariffs hit, the recession scenario is gloomy. A recession could last for two years and see the economy shrink by more than half a percentage point.

So, the government thinks Quebec will have to go deeper into debt to weather the storm. The debt to GDP ratio — an indicator of how heavily indebted Quebec is compared to how well it is doing financially — stands at 38.7 per cent of GDP and the government predicts it will grow in the coming years.

Still, Girard insisted that the government's plan is still to balance the budget by 2030. It will do that, Girard said, by finding more savings throughout the government. One of the central themes of this year's budget was "disciplined measures and targeted actions" — a reference, in part, to the reduction in administrative costs happening throughout the public service.

That exercise began last year and will continue, Girard said. The government is still looking to reduce its spending by about $2.5 billion to be able to reach a balanced budget in the coming years. The government also says in this budget that it will prioritize Quebec businesses in public procurement and "improve the tax system" — essentially eliminate and "optimize" some tax credits to save $3 billion over five years.

All in all, despite the record-high spending and the criticisms from the opposition, Girard presented this year's budget as striking a balanced note. It does two things at once: funds social services, he said, while supporting a threatened economy. "Faced with great uncertainty," he said, "we're making the choice to concentrate on the economy all while protecting public services."

Journalist

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