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Canada’s economy could gain nearly seven per cent, or $210 billion, in real GDP over a gradual period by fully removing internal trade barriers between the country’s 13 provinces and territories, according to a report published Tuesday by the International Monetary Fund (IMF).
On average, regulation-related barriers are the equivalent of a nine per cent tariff nationally, estimates the report, which was co-authored by IMF researchers Federico J. Diez and Yuanchen Yang with contributions from University of Calgary economist Trevor Tombe.
That would-be tariff is even higher in service-oriented sectors like health care and educational services — more than 40 per cent — where professional mobility between provinces is highly regulated.
“Such a level would be prohibitive in most international trade agreements,” the authors wrote. For comparison, the Bank of Canada estimates that the U.S.’s average tariff rate on Canada was 5.9 per cent in November 2025.
The report also notes that smaller provinces and the northern territories are disproportionately impacted by internal trade barriers, facing higher costs compared to bigger provinces with diversified economies.
“The result is a patchwork economy where geography and regulation jointly shape opportunity — and where advantages that normally come with scale are muted,” the report says.
The Atlantic provinces would benefit the most from the removal of trade barriers, according to the report. Prince Edward Island in particular stands to save nearly 40 percentage points in real GDP per worker by removing those internal trade costs, it says.
“The evidence is clear: internal barriers remain large, economically costly, and increasingly out of step with the needs of a modern, vibrant, service-intensive economy,” the authors wrote.
“Removing them offers one of the most powerful — and least fiscally costly — levers to raise productivity, strengthen resilience, and support inclusive growth.”
‘Canada isn’t really one economy’
Because of the trade barriers between provinces, “Canada isn’t really one economy. It’s really 10 economies,” said Alicia Planincic, director of policy and economics at the Business Council of Alberta in Calgary.
Smaller provinces are more likely to rely on trade with other provinces, she noted, which is why removing internal barriers in those regions would have a bigger impact than in Ontario or Alberta.
It’s not just a matter of moving goods across provincial borders, either, she said.
“We have a lot of inefficiencies where it’s more difficult for folks who see a job opportunity in another province to move to that province or for businesses to expand their operations and sell to new markets right here in Canada,” she said.
While some industries have been pushing for the removal of internal trade barriers for years, the movement gained wider recognition last year after U.S. President Donald Trump imposed tariffs on Canada, forcing both the federal and provincial governments to look inward for more trade opportunities.
To date, some provinces, like Ontario and Manitoba, have signed bilateral memorandums of understanding. The issue moved forward nationally in November when the federal government, the provinces and the territories signed an agreement to drop trade barriers on most goods except alcohol and food.
WATCH | Breaking down November’s agreement on interprovincial trade:
Will Canada’s new agreement on interprovincial trade actually deliver economic benefits?
An agreement between all Canadian provinces, territories and the federal government will drop interprovincial trade barriers on many goods except food and alcohol starting in December. Author and researcher Ryan Manucha shares his thoughts on whether the deal will provide real economic benefits to the country.
However, services — which make up the vast majority of internal trade costs, according to the IMF, and which would make up about four-fifths of the GDP gains outlined in the report — were largely exempt from that agreement.
The report points to finance, telecom, transportation and professional services as far-reaching sectors that “ripple through the economy” and raise costs for all of the businesses they touch. Ultimately, it will be up to the provinces to make progress on internal trade barriers, said Planincic.
“It’s partly political will. It’s also partly that it is quite complicated,” she said. “There’s this idea that it’s sort of this singular thing that we just need to get together and remove.
“But in fact, it’s many, many thousands of rules and regulations that are different province to province. And so there’s quite a lot of work and complexity involved with figuring out how do they align from one province to the next.”
