Tax cuts, dropping U.S. tariffs will hurt Ottawa’s fiscal position: Desjardins report

OTTAWA — A new analysis of federal finances ahead of the much-anticipated fall budget argues Ottawa’s fiscal position was made worse by its decision to drop counter-tariffs and cut income taxes.

Desjardins deputy chief economist Randall Bartlett says in a new outlook published ahead of the Nov. 4 federal budget that Ottawa’s deficit is likely to be among the largest in recent memory outside of a recession or pandemic.

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He estimates the federal deficit will hit $74.5 billion for this fiscal year, $6 billion higher than the parliamentary budget officer’s projections.

Bartlett says higher spending on defence and infrastructure will push the federal government’s deficit up this year, but so too will Ottawa’s decision to cut income taxes over the summer and to drop counter-tariffs on the United States.

While those moves could spur stronger economic growth, Desjardins estimates that boost won’t be enough to offset foregone tax revenue.

Bartlett warns Canada ought not to take its strong global credit rating for granted as persistent risks to the economy from U.S. trade uncertainty could put further pressure on Ottawa’s debt position.

This report by The Canadian Press was first published Oct. 22, 2025.

Craig Lord, The Canadian Press