The outlook for Canada’s provinces is difficult to chart but some surprising resilience to U.S. trade pressures and historical revisions to economic data have most provinces on better footing heading into the 2026 budget season, argues a new analysis from Desjardins.

Randall Bartlett, deputy chief economist at Desjardins and one of the authors of the report published Tuesday, said a number of developments since even the provinces’ fall fiscal updates have shown what a fraught time it is for economists and policymakers alike.

“It is a much more difficult time to be doing forecasting for any economy, really,” he said.

British Columbia kicks off provincial budget season on Tuesday with Alberta on deck next week and other provinces expected to follow with their own fiscal updates in the coming months. The federal government shifted to a fall budget schedule last year, which it justified in part as a way to give provinces more clarity on Ottawa’s spending plans in advance.

Bartlett said at this time last year, the outlook for the provincial economies was “much worse than it is today” as U.S. President Donald Trump threatened waves of tariffs and Canada stared down an uncertain future.

Sharp tariffs have materialized on some sectors, weighing heavily on Ontario steel and automaking and Quebec’s aluminum industry, for example. But thanks to an exemption for goods compliant with the Canada-U.S.-Mexico agreement on trade, Trump’s blanket tariffs on Canada have not had as much of an impact on the economy as first feared, Bartlett said.

Also giving provincial economies a lift are recent historical revisions to gross domestic product published by Statistics Canada in November. Those updates, based on new information received by StatCan from the pandemic recovery era, raised previous estimates of GDP in 2022 and 2023 across the board.

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Bartlett said the revisions helped to assuage some concerns about stagnating per capita GDP and productivity growth and put the provinces on better footing than first expected entering the trade war.

“Overall, the provinces, I think, economically have fared better than we had previously expected in our last provincial outlook,” he said.

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How a better-than-expected 2025 will set up the 2026 budgets will vary province to province as new risks have materialized since the fall.

Trade tensions with the United States are expected to reach a tipping point this year with the scheduled review of CUSMA now underway.

Central Canada remains most exposed to Trump’s tariffs, Bartlett said, highlighted by the U.S. president’s recent attempts to target Quebec’s aerospace industry. But he said British Columbia, Saskatchewan and most Atlantic provinces are better positioned with diversified trade portfolios.

Many of these provinces could see dividends from the federal government’s renewed diplomacy with China, which is expected to reduce tariffs on canola — a big boost for Saskatchewan in particular. Increased trade could also see increased exports head overseas from B.C. ports.

Reduced Chinese tariffs on seafood and peas should also improve the respective outlooks for the Maritime provinces and Manitoba, Bartlett said.

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Regime change in Venezuela could threaten the fiscal picture of oil-producing provinces such as Alberta, Saskatchewan and Newfoundland and Labrador, Desjardins argued. Canadian producers could get less for their product if more heavy oil from Venezuela eventually makes its way up the U.S. Gulf Coast, the report said, which risks delaying investment in domestic production and lowering GDP in future years.

“That leads to reduced profitability for energy companies, which can lead to reduced production, reduced employment and also reduced revenues for the provincial government,” Bartlett said.

Despite the risks to Alberta, Bartlett noted the Wild Rose province comes into 2026 with perhaps the cleanest fiscal positions among the other provinces as it implements cost-cutting measures.

“I think there is an opportunity to find further savings for Alberta and ultimately position themselves well for when we get hopefully a more certain and less volatile regime for global energy prices,” he said.

Bartlett said each of the provinces took a different approach this time a year ago when accounting for the possible impact of Trump tariffs on their fiscal paths.

Despite the ongoing trade headwinds, Bartlett said Ontario and Quebec in particular baked a strong degree of “prudence” into their budgets last year and should see relatively rosier fiscal outlooks by comparison when they offer their updates in the coming weeks.

“We’re expecting some (provinces) to have underperformed or overperformed their Budget 2025 numbers when budget season’s over. But ultimately we’ll probably come around pretty close to where the budget numbers were in 2025, with the exception of maybe Alberta and some of the other energy producing provinces,” he said.

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