Budget 2025: What It Means for Manufacturing
Alberta Budget 2025 projects manufacturing exports to decline under 15% US tariffs, with $32B in annual US trade at risk across chemicals, food, and wood.
Manufacturing exports to US (2024)
$32B
Face 15% tariff
Corporate income tax revenue
$6,764M
-$587M (-8%) from 2024-25
Net corporate operating surplus
-9% forecast
Driven by tariff impacts
Sector Impact Summary
Manufacturing is the sector most directly and severely exposed to U.S. tariffs in Budget 2025. Alberta exported approximately $32 billion in manufacturing goods to the United States in 2024, comprising nearly three-quarters of the province's total international manufacturing exports. Under the budget's baseline assumption of 15% U.S. tariffs on all goods (with energy products at a lower 10%), real manufacturing exports are forecast to decline in 2025. Unlike energy products, where U.S. refineries have limited ability to substitute Alberta heavy crude, manufacturing goods face competition from domestic U.S. producers, making trade flows more responsive to tariff-driven price increases.
The fiscal impact is substantial. Corporate income tax revenue is estimated at $6,764 million, down $587 million (8%) from the 2024-25 forecast of $7,351 million. Net corporate operating surplus -- a measure of corporate profits and a key driver of corporate income tax collections -- is forecast to fall 9% to just over $100 billion in 2025. Tariff levies, rising costs from retaliatory tariffs on imported machinery and equipment, and weaker export demand will squeeze margins across manufacturing industries. Some companies are expected to postpone or cancel projects still in the planning stages due to heightened uncertainty.
The counterbalancing force is a set of major industrial projects already in construction or approaching commissioning. Dow's $11.6 billion Path2Zero project is ramping up construction. Air Products' hydrogen facility and Imperial Oil's renewable diesel expansion are slated to come online in 2025. Wolf Midstream's NGL North System Phase 2, Shell's Polaris carbon capture project, and the Atlas Carbon Storage Hub are all under construction. These committed projects will support manufacturing investment even as new project decisions face delays. The budget also provides indirect support through the new 8% personal income tax bracket saving Albertans $1.2 billion annually, which will support domestic consumer demand for manufactured goods.
Key Budget Measures
Corporate income tax revenue: $6,764 million. Down $587 million (8%) from the prior year, reflecting tariff impacts on corporate profits and weaker economic growth. Alberta maintains its 8% corporate income tax rate, the lowest among Canadian provinces. (Source: Fiscal Plan 2025-28, Fiscal Summary, p.17)
15% U.S. tariff on manufactured goods. The budget baseline assumes 15% tariffs on all goods except energy (10%). Manufacturing goods are expected to be more significantly impacted than energy exports due to the availability of domestic U.S. substitutes. (Source: Fiscal Plan 2025-28, Overview, p.10)
Canadian retaliatory tariffs. Canada is expected to retaliate with tariffs on a broad range of consumer goods, which will increase input costs for manufacturers who rely on imported machinery, equipment, and materials. (Source: Fiscal Plan 2025-28, Overview, p.10)
Jobs, Economy and Trade operating expense: $2,305 million. The ministry responsible for economic development, trade facilitation, and workforce programs. Includes child care, labour market programs, and worker transition support. (Source: Government Estimates 2025-26)
New 8% personal income tax bracket: $1,200 million annual tax savings. The new bracket on the first $60,000 of income saves individuals up to $750, supporting consumer spending and domestic demand for manufactured goods. (Source: Fiscal Plan 2025-28, Overview, p.8)
Non-oil and gas investment outlook. Nominal investment in industries outside oil and gas is forecast to grow about 4% in 2025, but real (inflation-adjusted) investment is forecast to stay roughly flat. Growth is forecast to rebound to around 4% real in 2026 when Dow's Path2Zero reaches peak construction. (Source: Fiscal Plan 2025-28, Economic Outlook, p.32)
Funding Changes
| Item | 2024-25 Forecast | 2025-26 Estimate | Change |
|---|---|---|---|
| Corporate income tax revenue | $7,351M | $6,764M | -$587M |
| Jobs, Economy and Trade operating | N/A | $2,305M | N/A |
| Net corporate operating surplus | ~$110B | ~$100B | -9% |
| Real non-energy investment growth | Decline | ~Flat | Stabilizing |
(Source: Fiscal Plan 2025-28, Fiscal Summary, p.17; Economic Outlook, p.32)
Capital Investment
Direct government capital investment in manufacturing is limited:
- Jobs, Economy and Trade capital plan: $25 million over three years ($16M, $7M, $2M). Covers IT systems, child care space creation, and economic data applications.
The budget's manufacturing impact flows primarily through policy measures (low taxes, tariff assumptions) and through cross-cutting capital investments that create demand for manufacturing output:
- $26.1 billion total Capital Plan creates substantial demand for manufactured construction materials, equipment, and industrial goods.
- $8.5 billion Transportation capital generates demand for steel, asphalt, concrete, and heavy equipment.
- $3.3 billion Education capital creates demand for building materials and classroom equipment.
- $1.5 billion Health capital drives demand for medical equipment and facility construction materials.
(Source: Capital Plan Details by Ministry 2025-28)
Risks
U.S. tariffs severely impacting exports. The 15% tariff on $32 billion in U.S.-bound manufacturing exports is the single greatest risk factor. Alberta's top 10 manufacturing exports to the U.S. -- including resin and synthetic rubber, starch and vegetable fat, basic organic chemicals, pulp, petrochemicals, fertilizer, sawmills, veneer and plywood, HVAC equipment, and frozen food -- all face this tariff.
Squeezed corporate profit margins. Net corporate operating surplus forecast to fall 9% in 2025. Combined tariff levies, rising input costs, and weaker export demand will compress margins across manufacturing subsectors.
Rising input costs from retaliatory tariffs. Canada's retaliatory tariffs on consumer goods will increase costs for manufacturers who rely on imported machinery, equipment, components, and materials.
Project delays and cancellations. Some companies are expected to postpone or cancel projects still in planning stages due to heightened uncertainty and rising input costs, dampening the manufacturing investment pipeline.
Opportunities
Major industrial projects under construction. Multiple committed mega-projects will sustain manufacturing investment: Dow's $11.6 billion Path2Zero, Air Products' hydrogen facility, Imperial Oil's renewable diesel expansion, Wolf Midstream's NGL North System Phase 2, Shell's Polaris carbon capture, and the Atlas Carbon Storage Hub.
Weaker Canadian dollar as partial buffer. The weaker Canadian dollar (forecast at US69.6 cents) partially buffers tariff impacts by making Alberta manufactured goods cheaper for international buyers in non-U.S. markets.
Medium-term export recovery. Over the medium term, exports are expected to gradually recover as companies find alternative markets and supply chains adjust. Real investment outside oil and gas is forecast to rebound to around 4% growth in 2026 before rising further.
Personal income tax cut supporting domestic demand. The new 8% bracket reducing taxes by $1.2 billion province-wide supports domestic consumer demand for manufactured goods, partially offsetting export market losses.
$26.1 billion Capital Plan as demand driver. The province's massive capital program creates sustained demand for construction materials, industrial equipment, and manufactured inputs across all government infrastructure projects.
What's Missing
The budget does not include a specific manufacturing competitiveness program or tariff mitigation strategy despite acknowledging the sector will be significantly impacted. There is no export diversification fund to help manufacturers develop non-U.S. markets. There are no accelerated depreciation provisions or investment tax credits targeted at manufacturing equipment purchases. The budget lacks specific measures to reduce the input cost burden from retaliatory tariffs on imported components. There is no manufacturing workforce retention or retraining program to address potential layoffs from export market contraction.
Net Assessment
Manufacturing faces the most severe tariff exposure of any Alberta sector, with $32 billion in annual U.S. trade at risk from 15% tariffs. The budget acknowledges the challenge but provides limited sector-specific mitigation, relying instead on Alberta's low-tax environment, the weaker dollar, and the countercyclical demand created by a $26.1 billion capital plan. Major committed industrial projects provide a floor for investment, but the absence of targeted manufacturing support measures leaves the sector to absorb tariff impacts largely through market adjustment.
Related Analysis
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