Ottawa’s decision to slash income taxes and drop counter-tariffs on U.S. goods may come at a steep cost to Canada’s fiscal health, according to a new Desjardins report released ahead of the federal government’s November 4 budget.

The analysis by Randall Bartlett, Desjardins’ deputy chief economist, warns that the federal deficit could swell to $74.5 billion this fiscal year — about $6 billion higher than estimates from the Parliamentary Budget Officer. Bartlett notes that rising spending on defence and infrastructure is already stretching federal finances, but the recent tax cuts and tariff rollbacks have further eroded government revenues.

While the measures were intended to stimulate growth, Desjardins says the resulting economic boost will likely fall short of compensating for the lost income and trade revenue. The report cautions that Canada should not take its strong global credit rating for granted, as lingering U.S. trade uncertainty and growing fiscal pressures could strain Ottawa’s ability to manage its debt responsibly.