Premier Danielle Smith defended on Friday the massive income-tax break in Alberta’s proposed 2025 budget, as critics accused her of giving with one hand while taking with the other.

Alberta is bracing for a trade war with the United States that, when coupled with sagging energy prices, will usher in years of deficits, according to the provincial budget tabled Thursday, adding to the growing list of provinces preparing for economic turmoil that would accompany tariffs on Canadian goods.

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 U.S. tariffs are implemented and decrease government revenues and slow economic growth.

Alberta is forecasting it will end the next fiscal year with a $5.2 billion deficit but that could soar to $8.7 billion under a worst-case tariff scenario outlined in Thursday’s provincial budget.

Alberta’s books are set to turn red, according to Thursday’s budget, as the province readies to reckon with three-straight years of projected fiscal shortfalls brought on by tariff-based uncertainty,