Budget 2025: What It Means for Manufacturers

The Bottom Line

Budget 2025 delivers a stark warning for Alberta manufacturers: you are among the sectors hardest hit by U.S. tariffs. Alberta exported approximately $32 billion in manufacturing goods to the U.S. in 2024, nearly three-quarters of total international manufacturing exports, and 15% tariffs on those goods will directly reduce your competitiveness. The government maintains Alberta's low-tax advantage and continues the $311 million Alberta Petrochemicals Incentive Program, but no specific tariff compensation program is offered. The personal income tax cut saves your workers up to $750 each.

Top Measures That Affect You

1. U.S. Tariffs of 15% on Manufacturing Goods

The budget assumes 15% tariffs on all Canadian goods exported to the U.S., with the exception of energy products at 10%. The Fiscal Plan explicitly states that the manufacturing sector is "highly exposed" to U.S. tariffs due to heavy reliance on exports south of the border. Key products affected include chemicals, value-added food (notably beef and canola products), as well as petrochemical and coal manufacturing. Unlike energy products, manufacturing goods tend to be more responsive to higher prices because of the ready availability of domestic substitutes in the U.S.

2. Canadian Retaliatory Tariffs Raise Input Costs

Canada is expected to retaliate with tariffs on a broad range of consumer goods. If your manufacturing operation imports components, machinery, or raw materials from the U.S., your input costs are going up. This two-way tariff pressure squeezes your margins from both the revenue and cost sides.

3. Alberta Petrochemicals Incentive Program Continues

Budget 2025 continues the Alberta Petrochemicals Incentive Program (APIP) with $311 million over three years. This program provides tax credits in the form of capital grants to petrochemical producers and aims to grow value-added processing of natural gas in Alberta. If your operation is in the petrochemical sector, this remains a significant support.

4. Jobs, Economy and Trade: $2,305 Million

The Jobs, Economy and Trade ministry receives $2,305 million in operating expense in 2025-26. This ministry oversees skills and training programs ($193 million over three years), the Investment and Growth Fund ($45 million over three years), and the Film and Television Tax Credit ($235 million over three years). The skills training component directly supports your workforce development needs.

5. Low Corporate Tax Environment Maintained

Alberta maintains its 8% small business corporate tax rate and no provincial sales tax. The Fiscal Plan emphasizes that low personal and corporate income taxes, low fuel tax, and no sales tax mean that Alberta businesses generally pay lower overall taxes than those in other provinces. This competitive advantage matters more than ever when tariffs erode your export margins.

6. Personal Income Tax Cut for Workers

The new 8% bracket on the first $60,000 of taxable income saves your employees up to $750 per year. Workers earning less than $60,000 see their personal income taxes fall by approximately 20%. This effectively increases your workers' take-home pay without raising your payroll costs.

7. $4 Billion Contingency for Uncertainty

Budget 2025 doubles the contingency to $4 billion, partly to address unforeseen implications of increased economic uncertainty from tariffs. This signals the government has fiscal room to respond if the tariff situation worsens, potentially with support programs for affected industries.

Direct Financial Impact

Export revenue at risk: Real manufacturing exports are expected to decline significantly. With nearly three-quarters of Alberta's $32 billion in manufacturing exports going to the U.S., a 15% tariff directly increases the cost of your products for American buyers. The Fiscal Plan notes that manufacturing goods face more substitution risk than energy products.

Corporate profits declining: Net corporate operating surplus province-wide is forecast to decline 9% in 2025, weighing on corporate income tax revenues. This reflects the broader profit squeeze that manufacturers like you will experience.

Real GDP growth slowing: Alberta's real GDP growth decelerates from 3.0% in 2024 to 1.8% in 2025, with the economy expected to fare better than other provinces due to the energy sector's share of GDP. However, the manufacturing sector is on the wrong side of this split.

Exchange rate provides partial offset: The Canadian dollar is forecast to average 69.6 US cents, down from 71.7 cents the prior year. The weaker dollar makes your exports somewhat cheaper in U.S. dollar terms, partially offsetting the tariff impact.

Interest rates: The 10-year bond rate is forecast at 3.10%, down from 3.30%. Lower interest rates reduce your financing costs for capital investment and equipment purchases.

Service Changes

Workforce development: Skills and training programs receive $193 million over three years through Jobs, Economy and Trade. These programs can help you upskill workers or retrain employees displaced by tariff-related production changes.

Investment and Growth Fund: The $45 million fund over three years supports business development and investment attraction. This may provide opportunities for manufacturers looking to diversify products or markets.

Red tape reduction: Service Alberta and Red Tape Reduction continues to streamline regulatory compliance. Reducing administrative burden is particularly valuable when your margins are under tariff pressure.

Trade market development: The government is working to cultivate export markets and increase market access for Alberta products, addressing barriers to trade. Diversifying your export destinations beyond the U.S. becomes more urgent.

What's Missing

No tariff compensation program: Despite explicitly identifying manufacturing as one of the hardest-hit sectors, the budget includes no direct compensation or adjustment program for manufacturers losing export revenue.

No accelerated depreciation: The budget does not introduce enhanced capital cost allowance or accelerated depreciation measures to encourage manufacturers to invest in productivity improvements that could offset tariff impacts.

No supply chain support: There is no specific program to help manufacturers restructure supply chains disrupted by bilateral tariffs.

No energy cost relief: Despite the importance of energy costs for manufacturing, the budget does not include specific electricity or natural gas rate relief for industrial consumers.

No export diversification grants: While the government speaks of cultivating export markets, there is no dedicated fund for manufacturers to develop non-U.S. export channels.

Key Dates

Date	Event
January 1, 2025	New 8% personal income tax bracket takes effect
February 27, 2025	Budget 2025 tabled
April 1, 2025	2025-26 fiscal year begins
After July 1, 2025	Adjusted payroll withholdings reflect tax cut for workers
2025-26	Tariff impacts expected to weigh on manufacturing output
2025-26	Skills and training programs available for workforce retraining
2025-28	$311M APIP petrochemical incentives continue
By 2027	Economy expected to adjust, with GDP growth picking up to over 2%

Where to Get Help

• Jobs, Economy and Trade: For information on the Investment and Growth Fund, skills training, and trade support. Visit alberta.ca/jobs-economy-and-trade.
• Alberta Petrochemicals Incentive Program: For eligible petrochemical manufacturers. Visit alberta.ca/alberta-petrochemicals-incentive-program.
• Canadian Manufacturers and Exporters (Alberta): For industry advocacy on tariff and trade issues.
• Alberta Treasury Board and Finance: For income tax and fiscal questions. Visit alberta.ca/budget.
• Trade Commissioner Service: For help diversifying export markets beyond the U.S.
• Your MLA: Contact your local Member of the Legislative Assembly to raise concerns about tariff impacts on your manufacturing operation.