Ontario’s 2025 Budget outlines a $232.5 billion fiscal plan focused on safeguarding the province’s economy from U.S. tariff threats, while making targeted investments in business competitiveness, infrastructure and essential services.

It was delivered at a time of widespread economic uncertainty when governments in every province are being forced to make contingency plans that account for unpredictable U.S. trade policies and the loss of investor confidence that’s already beginning to shake provincial economies. Ontario is particularly vulnerable given the size and scope of key industries such as the automotive and steel manufacturing sectors, and the impact that real or threatened tariffs are already causing.

Case in point: the province’s fiscal outlook has taken a decided turn for the worse only months after the rosy 2024 Fall Economic Statement, when trade tensions with the U.S. had yet to boil over. Ontario is now projecting deficits of:

• $14.6 billion in 2025–26
• $7.8 billion in 2026–27
• A surplus of $200 million in 2027–28

The province’s net debt-to-GDP ratio is expected to increase modestly, reaching 38.9% in 2026–27 before slightly declining. Real GDP growth is forecast at:

• 0.8 per cent in 2025
• 1 per cent in 2026
• 1.9 per cent in 2027 and 2028

These projections are contingent on trade stability. Prolonged or escalated tariff measures could place downward pressure on growth forecasts and revenue streams. To mitigate the impact of U.S. tariffs and economic uncertainty, the government proposed a series of measures aimed at protecting jobs and promoting investment:

Support for business

• Protecting Ontario Account: A new $5 billion fund to provide liquidity relief and support for businesses facing tariff-related disruption
• Ontario Made Manufacturing Investment Tax Credit: Temporary increase of the tax credit rate to 15 per cent from 10 per cent for Canadian-controlled private corporations (CCPCs), while temporarily expanding eligibility to a non-refundable 15 per cent version of the credit extended to non-CCPCs that make eligible investments in the province
• Business tax deferrals: Six-month deferral on a range of provincially administered business taxes, from April 1^st to October 1^st, 2025
• WSIB support: $4 billion in rebates and premium rate reductions for qualifying employers
• Life Sciences Innovation Fund: $15 million annually over three years to support innovation in Ontario’s life sciences sector
• Ontario grape and wine support: $35 million annually through the Ontario Grape Support Program and $84 million annually for VQA wine producers
• Critical Minerals Processing Fund: $500 million to accelerate strategic mineral development across Ontario
• Ontario Shipbuilding Grant Program: $200 million to expand provincial shipbuilding capabilities
• Ontario Together Trade Fund: $50 million over three years to support interprovincial trade expansion
• Investments in growth funds:
  • $5 billion in additional support for the Building Ontario Fund
  • $600 million for the Invest Ontario Fund
  • $90 million in venture capital via Venture Ontario

Indigenous economic participation

The budget includes proposed measures to enhance Indigenous economic development:

• Indigenous Opportunities Financing Program: Triples loan guarantees to $3 billion
• Indigenous Participation Fund: $70 million over four years
• Resource Development Scholarships: $10 million over three years for postsecondary education support

Labour market and training

Proposed measures to address workforce support needs include:

• Skills Development Fund: $1 billion over three years for capital and training streams
• Vocational and skills training: $50 million in 2025–26
• Trade-Impacted Communities Program: $40 million in grants to support communities affected by trade disruptions
• New worker training centres: $20 million in 2025–26 to retrain laid-off workers, including workers in industries impacted by U.S. tariffs

Infrastructure spending

Significant infrastructure commitments span transportation, housing, education and healthcare:

• Housing infrastructure: $400 million in additional funding for the Municipal Housing Infrastructure Program and Housing-Enabling Water Systems Fund
• Health infrastructure: $56 billion over 10 years, including more than $43 billion in capital grants
• Community health services: $280 million over two years to expand access to diagnostic testing and surgeries
• Primary care teams: $235 million in 2025–26 for up to 80 new teams across Ontario
• Education infrastructure: More than $30 billion over 10 years for school repairs and modernization
• Highway 407 East: Permanent removal of tolls to support regional connectivity

Tax relief and incentives

Proposed tax relief measures aimed at supporting families and key sectors include:

• Ontario Fertility Treatment Tax Credit: A new refundable credit of up to 25 per cent on eligible fertility treatment expenses, capped at $5,000 per year
• Gasoline tax and fuel tax reductions: Making recent gas and fuel tax cuts permanent
• Alcohol tax reductions (effective August 1^st, 2025):
  • Spirits basic tax cut from 61.5 per cent to 30.7 per cent
  • Beer tax halved for Ontario microbrewers (draft: from 35.96¢/L to 17.98¢/L; non-draft: from 39.75¢/L to 19.88¢/L)
  • Mark-up reductions on cider and ready-to-drink (RTD) beverages, lowering rates from more than 60 per cent to 32–48 per cent

Research and innovation

• Ontario Research Fund: An additional $207 million over three years beginning in 2025–26 to strengthen research and development capabilities across the province

While many of the measures proposed in Budget 2025 were announced previously, the Ford government’s fiscal message is clear: with so much economic uncertainty, the path forward for the province may be rocky. It intends to maintain deficit spending to protect the province’s economy, while hoping that erratic decision-making in Washington fizzles in the near term—or at least targets markets outside of Canada.

The RH Partners Tax Team

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