CALGARY - Canada's oil-producing province of Alberta on Thursday forecast a budget deficit of C$5.2-billion ($3.5-billion) for the 2025/26 fiscal year if US tariffs are implemented and decrease government revenues and slow economic growth.

The outlook reflects a dramatic reversal of Alberta's fiscal health, following what is expected to be a C$5.8-billion budget surplus in the current fiscal year, and illustrates the widespread uncertainty Canadian policy-makers are facing as they grapple with the tariffs situation.

"How do you plan for a budget when there are so many unknowns, when you have so much unpredictability with the US President and what he may or may not say in the coming days, weeks and months?" Alberta's Finance Minister Nate Horner told reporters.

The province estimated its revenue for 2025/26 at C$74-billion, C$6.6-billion lower than its 2024/25 third quarter forecast of C$81 billion, largely due to lower expected oil prices and royalties.

It said its Gross Domestic Product growth is forecast to decelerate to 1.8% in 2025 and 1.7% in 2026, after expanding an estimated 3% last year.

Alberta said it is also forecasting deficits for the 2026/27 and 2027/28 fiscal years, of C$2.4-billion and C$2.0-billion respectively.

In its annual budget document, Alberta said its projections reflect an anticipated "moderate" US-Canada trade conflict of potential tariffs and retaliatory measures.

Alberta's budget is based on an analysis that a 25% tariff would be unsustainable for the US economy, and reflects what the province believes is a more likely 15% average tariff for the year on most goods and a 10% tariff on oil, Horner said.

He emphasized Alberta has no knowledge of what US President Donald Trump plans to do beyond what he has said publicly, adding that the province is simply making its "best and most reasonable guess" at what it is facing.

Trump has proposed implementing a 10% tariff on all US imports of Canadian crude oil, and a 25% tariff on all other Canadian goods on March 4. Canada has said it will apply tariffs on C$155-billion of US goods in response.

However, there has been confusion about the timing of the tariffs, as well as how long they could be in place.

If a 25% tariff on all non-oil goods was implemented, the province said Thursday, the revenue hit to Alberta would be much larger and the deficit could rise to C$8.7-billion in 2025/26.

With no tariffs at all, Alberta's deficit would be C$2.9-billion, the budget document shows. Lower global oil prices, dramatic population growth straining public services, and the cost of a new tax cut are other factors putting stress on the province's finances.

Alberta is home to the oil sands, the world's third-largest crude reserves, which means its economy is closely tied to oil prices.

The province is projecting the discount on Canadian heavy crude compared to the U.S. benchmark West Texas Intermediate crude CLc1 will widen due to tariffs, to an average of $17.10 per barrel in 2025/26, up from $13.20 in 2024-25.

Alberta, however, said its energy sector is well-positioned to weather this challenge, in part due to a weaker Canadian dollar that will help to cushion the blow of tariffs. Alberta oil is priced in U.S. dollars, so a weaker loonie increases the value of oil revenues for Canadian producers.

It said other sectors, like agriculture and manufacturing, will be more severely impacted by tariffs, and consumers are also expected to be more cautious.

Alberta said it will double the size of its annual contingency fund from C$2-billion to C$4-billion, in part to provide the province with flexibility to address what it called "increased economic uncertainty."