
The Quebec government is promising to help businesses affected by tariffs. Can it afford to?
Social Sharing
The Quebec government has posted a historic budget deficit, is currently trying to scale back spending and is facing the threat of U.S. President Donald Trump imposing tariffs that would decimate the province's economy.
If the tariffs come, Premier François Legault has signalled that the province would step in with short-term loans to mitigate the impact of layoffs.
But economists and experts say Quebec is in an unfavourable financial position at an inopportune moment. As the province weighs potentially costly measures to counteract tariff impacts, they warn that any relief measures would have to be extremely targeted or they would risk putting the province's books into an even more dire state.
Preetika Joshi, an assistant professor of accounting at McGill University's Desautels Faculty of Management, said in an interview that the Quebec government has funds set aside for emergencies — exactly like the kind posed by Trump's tariffs. But she said the province's deficit spending might mean the government needs to be more surgical with its response.
"Just because they're running a deficit doesn't mean they don't have the physical capacity or ability to help companies. It's a little bit constrained," she said. "What it means is that whatever funds they have, they're going to have to deploy them in a more efficient manner."
Joshi said the government may have to take on more debt to respond to tariffs. That may seem like a distasteful prospect — Quebec's debt burden stands at roughly 38 per cent of its GDP — but she said that amount is in line with most other provinces and OECD countries.
Economists say the tariffs would likely plunge the Canadian economy into a recession. When the economy is in recession, government incomes drop. Combined with the cost of whatever tariff relief measures Quebec would implement, that poses a unique fiscal challenge.
WATCH | Quebec's aluminum industry at risk:
How tariffs on Quebec's massive aluminum exports could have ripple effects across the economy
26 days ago
Duration 2:57
Moshe Lander, an economics professor at Concordia University, said the Quebec government has been mismanaging its finances — spending too much, running deficits — when the economy was doing well.
"What are they going to do when the economy starts shrinking? They're going to have to run an even bigger deficit," he said. "But the problem is that the accumulated deficits over time add up to larger and larger debts, and those debts have to be financed."
In March of last year, Quebec Finance Minister Eric Girard announced that the province was projecting a deficit of $11 billion. However, in November, Girard said the economy was doing a bit better than expected. He announced more than $2 billion in new spending, despite the historic deficit projected.
Unemployment rate could rise, report says
A recent Desjardins Group report titled "Tariff Turmoil Foreshadows an Eventful Budget Season," projected that Canada's provinces collectively have up to $100 billion to provide relief to industries and individuals affected by tariffs.
However, the report noted Quebec's position was more vulnerable to tariffs than other provinces, in part because nearly eight per cent of the province's output is directly linked to U.S. exports. It said a blanket 25 per cent tariff on Canadian exports could see Quebec's unemployment rate rise — both through direct and indirect job losses — to 7.5 per cent.
Jimmy Jean, the chief economist at Desjardins Group, said provincial governments like Quebec have some "automated stabilizers" in place to soften the blow of job losses, which include employment insurance.
Quebec also has the ability to invest in "reskilling" workers — teaching them new professions and transitioning them to sectors less intertwined with the U.S. economy, Jean said. Legault has suggested workers could be retrained to work on hydroelectric projects. Jean said it's not clear how feasible that is, but it is an example of a way the provincial government could counter tariffs.
But those programs would be expensive and government revenue loss from a tariff-induced recession would also likely be substantial, he said, leading to more government debt. Jean said that's not necessarily a bad thing, as long as it leads to more economic growth in the future.
"The question is more 'what kind of measures do you roll out in order to boost productivity and economic growth over the long term?'" he said. "That's where decision making will be very important. It's certainly not the same kind of environment that we have during the pandemic, especially when you look at interest rates being much higher now."
Joshi and Lander, the accounting professor and the economist, both noted how burdensome it is for companies to do business in Quebec and how reducing that burden could be one way the government responds to tariffs.
Corporate tax rates are high in the province and things like language laws add barriers and costs.
"This government has created some of the most extreme interprovincial barriers," Lander said.
"Would they be willing to sacrifice some of those right now, relax some of those rules right now to try and give flexibility to the economy, to try and give Quebec export markets within Canada that otherwise wouldn't exist? I don't know that they're willing to do that. So they very much are part of this problem."
In a post on X Wednesday afternoon following more tariff talk at the White House, Legault said the province is ready to "speed things up" regarding interprovincial trade.
"Faced with a market of 340 million people about to impose tariffs on us, it makes perfect sense to increase our trade with the 32 million Canadians outside Quebec," he wrote.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Toronto Star
an hour ago
- Toronto Star
Trump's new travel ban takes effect as tensions escalate over immigration enforcement
WASHINGTON (AP) — President Donald Trump's new ban on travel to the U.S. by citizens from 12 mainly African and Middle Eastern countries took effect Monday amid rising tension over the president's escalating campaign of immigration enforcement. The new proclamation, which Trump signed last week, applies to citizens of Afghanistan, Myanmar, Chad, the Republic of Congo, Equatorial Guinea, Eritrea, Haiti, Iran, Libya, Somalia, Sudan and Yemen. It also imposes heightened restrictions on people from Burundi, Cuba, Laos, Sierra Leone, Togo, Turkmenistan and Venezuela who are outside the U.S. and don't hold a valid visa.


Winnipeg Free Press
2 hours ago
- Winnipeg Free Press
Asian shares rally ahead of US-China trade talks
HONG KONG (AP) — Shares rose in Asia on Monday ahead of the second round of trade talks between Washington and Beijing, due later in the day in London. Tokyo's Nikkei 225 gained 1.1% to 38,137.09 as the government reported that the Japanese economy contracted by 0.2% in the January-March quarter. In South Korea, the Kospi added 1.9% to 2,865.52. Chinese markets rose even though the government reported that exports slowed in May, growing 4.8% from a year earlier after a jump of more than 8% in April. Exports to the United States fell nearly 10% compared with a year earlier. China also reported that consumer prices fell 0.1% in May from a year earlier, marking the fourth consecutive month of deflation. Hong Kong's Hang Seng picked up 1.4% to 24,119.64 while the Shanghai Composite Index climbed 0.4% to 3,397.13. Australia's market was closed for a public holiday. On Friday, stocks gained ground on Wall Street following a better-than-expected report on the U.S. job market. The gains were broad, with every sector in the S&P 500 rising. That solidified a second consecutive winning week for the benchmark index, which has rallied back from a slump two months ago to come within striking distance of its record high. The S&P 500 rose 1% to 6,000.36. The Dow Jones Industrial Average added 1% to 42,762.87 while the Nasdaq gained 1.2%, to 19,529.95. Technology stocks, with their outsized values, led the broad gains. Chipmaker Nvidia jumped 1.2% and iPhone maker Apple rose 1.6%. Tesla rose 3.7%, regaining some of the big losses it suffered on Thursday when Trump and Musk sparred feverishly on social media. Circle Internet Group, the U.S.-based issuer of one of the most popular cryptocurrencies, rose 29.4%. That adds to its 168% gain from Thursday when it debuted on the New York Stock Exchange. U.S. employers slowed their hiring last month, but still added a solid 139,000 jobs amid uncertainty over President Donald Trump's trade war. The closely watched monthly update reaffirmed that the job market remains resilient, despite worries from businesses and consumers about the impact of tariffs on goods going to and coming from the U.S. and its most important trading partners. President Donald Trump's on-again-off-again tariffs continue to weigh on companies. Lululemon Athletica plunged 19.8% after the maker of yoga clothing cut its profit expectations late Thursday as it tries to offset the impact of tariffs while being buffeted by competition from start-up brands. Lululemon joins a wide range of companies, from retailers to airlines, that have warned investors about the potential hit to their revenue and profits because of tariffs raising costs and consumers potentially tightening their spending. Hopes that Trump will lower his tariffs after reaching trade deals with other countries are a main reason the S&P 500 has rallied back so furiously since dropping roughly 20% two months ago from an all-time high. Monday Mornings The latest local business news and a lookahead to the coming week. The economy is absorbing the impact from tariffs on a wide range of goods from key trading partners, along with raw materials such as steel. Heavier tariffs could hit businesses and consumers in the coming months. The U.S. economy contracted during the first quarter. Recent surveys by the Institute for Supply Management, a trade group of purchasing managers, found that both American manufacturing and services businesses contracted last month. On Tuesday, the Organization for Economic Cooperation and Development forecast 1.6% growth for the U.S. economy this year, down from 2.8% last year. The uncertainty over tariffs and their economic impact has put the Federal Reserve in a delicate position. In other trading early Monday, U.S. benchmark crude oil lost 3 cents to $64.55 per barrel. Brent crude, the international standard, gave up 5 cents to $66.42 per barrel. The U.S. dollar retreated to 144.42 Japanese yen from 144.85 yen. The euro edged higher, to $1.1422 from $1.1399.


Winnipeg Free Press
3 hours ago
- Winnipeg Free Press
Protests intensify in Los Angeles after Trump deploys hundreds of National Guard troops
LOS ANGELES (AP) — Tensions in Los Angeles escalated Sunday as thousands of protesters took to the streets in response to President Donald Trump's extraordinary deployment of the National Guard, blocking off a major freeway and setting self-driving cars on fire as law enforcement used tear gas, rubber bullets and flash bangs to control the crowd. Many protesters dispersed as evening fell and police declared an unlawful assembly, a precursor to officers moving in and making arrests of people who don't leave. Some of those remaining threw objects at police from behind a makeshift barrier that spanned the width of a street and others hurled chunks of concrete, rocks, electric scooters and fireworks at California Highway Patrol officers and their vehicles parked on the closed southbound 101 Freeway. Officers ran under an overpass to take cover. Sunday's protests in Los Angeles, a sprawling city of 4 million people, were centered in several blocks of downtown. It was the third and most intense day of demonstrations against Trump's immigration crackdown in the region, as the arrival of around 300 Guard troops spurred anger and fear among many residents. The Guard was deployed specifically to protect federal buildings, including the downtown detention center where protesters concentrated. Los Angeles Police Chief Jim McDonnell said officers were 'overwhelmed' by the remaining protesters. He said they included regular agitators who show up at demonstrations to cause trouble. Starting in the morning, the troops stood shoulder to shoulder, carrying long guns and riot shields as protesters shouted 'shame' and 'go home.' After some closely approached the guard members, another set of uniformed officers advanced on the group, shooting smoke-filled canisters into the street. Minutes later, the Los Angeles Police Department fired rounds of crowd-control munitions to disperse the protesters, who they said were assembled unlawfully. Much of the group then moved to block traffic on the 101 freeway until state patrol officers cleared them from the roadway by late afternoon. Nearby, at least four self-driving Waymo cars were set on fire, sending large plumes of black smoke into the sky and exploding intermittently as the electric vehicles burned. By evening, police had issued an unlawful assembly order shutting down several blocks of downtown Los Angeles. Flash bangs echoed out every few seconds into the evening. Governor says Guard not needed Democratic Gov. Gavin Newsom requested Trump remove the guard members in a letter Sunday afternoon, calling their deployment a 'serious breach of state sovereignty.' He was in Los Angeles meeting with local law enforcement and officials. The deployment appeared to be the first time in decades that a state's national guard was activated without a request from its governor, a significant escalation against those who have sought to hinder the administration's mass deportation efforts. Newsom and Los Angeles Mayor Karen Bass blamed the increasingly aggressive protests on Trump's decision to deploy the Guard, calling it a move designed to enflame tensions. They've both urged protesters to remain peaceful. 'What we're seeing in Los Angeles is chaos that is provoked by the administration,' she said in an afternoon press conference. 'This is about another agenda, this isn't about public safety.' But McDonnell, the LAPD chief, said the protests were following a similar pattern for episodes of civil unrest, with things ramping up in the second and third days. He pushed back against claims by the Trump administration that the LAPD had failed to help federal authorities when protests broke out Friday after a series of immigration raids. His department responded as quickly as it could, and had not been notified in advance of the raids and therefore was not pre-positioned for protests, he said. Newsom, meanwhile, has repeatedly said that California authorities had the situation under control. He mocked Trump for posting a congratulatory message to the Guard on social media before troops had even arrived in Los Angeles, and said on MSNBC that Trump never floated deploying the Guard during a Friday phone call. He called Trump a 'stone cold liar.' The admonishments did not deter the administration. 'It's a bald-faced lie for Newsom to claim there was no problem in Los Angeles before President Trump got involved,' White House spokesperson Abigail Jackson said in a statement. Deployment follows days of protest The arrival of the National Guard followed two days of protests that began Friday in downtown Los Angeles before spreading on Saturday to Paramount, a heavily Latino city south of the city, and neighboring Compton. Federal agents arrested immigrants in LA's fashion district, in a Home Depot parking lot and at several other locations on Friday. The next day, they were staging at a Department of Homeland Security office near another Home Depot in Paramount, which drew out protesters who suspected another raid. Federal authorities later said there was no enforcement activity at that Home Depot. The weeklong tally of immigrant arrests in the LA area climbed above 100, federal authorities said. Many more were arrested while protesting, including a prominent union leader who was accused of impeding law enforcement. The protests did not reach the size of past demonstrations that brought the National Guard to Los Angeles, including the Watts and Rodney King riots, and the 2020 protests against police violence, in which Newsom requested the assistance of federal troops. The last time the National Guard was activated without a governor's permission was in 1965, when President Lyndon B. Johnson sent troops to protect a civil rights march in Alabama, according to the Brennan Center for Justice. Trump says there will be 'very strong law and order' In a directive Saturday, Trump invoked a legal provision allowing him to deploy federal service members when there is 'a rebellion or danger of a rebellion against the authority of the Government of the United States.' He said he had authorized the deployment of 2,000 members of the National Guard. Trump told reporters as he prepared to board Air Force One in Morristown, New Jersey, Sunday that there were 'violent people' in Los Angeles 'and they're not gonna get away with it.' Asked if he planned to send U.S. troops to Los Angeles, Trump replied: 'We're gonna have troops everywhere. We're not going to let this happen to our country.' He didn't elaborate. About 500 Marines stationed at Twentynine Palms, about 125 miles (200 kilometers) east of Los Angeles were in a 'prepared to deploy status' Sunday afternoon, according to the U.S. Northern Command. ___ Offenhartz reported from New York. Associated Press writer Michelle Price contributed to this report from Bridgewater, New Jersey.