Canada’s economy stands to benefit by nearly seven percent, equivalent to $210 billion in real GDP, over a gradual period if internal trade barriers among the 13 provinces and territories are completely eliminated, as per a report issued by the International Monetary Fund (IMF) on Tuesday. The report, co-authored by IMF researchers Federico J. Diez and Yuanchen Yang with contributions from University of Calgary economist Trevor Tombe, estimates that regulation-related barriers translate to a nine percent national tariff on average.
The report highlights that in service-oriented sectors such as health care and educational services, the tariff could exceed 40 percent due to strict regulations on professional mobility between provinces. Comparatively, the Bank of Canada indicates that the U.S.’s average tariff rate on Canada was 5.9 percent in November 2025.
Internal trade barriers disproportionately impact smaller provinces and the northern territories, resulting in higher costs compared to larger provinces with more diversified economies. The report emphasizes that the removal of trade barriers would particularly benefit the Atlantic provinces, with Prince Edward Island potentially saving nearly 40 percentage points in real GDP per worker.
Alicia Planincic, director of policy and economics at the Business Council of Alberta in Calgary, emphasized the fragmented nature of Canada’s economy due to the existing trade barriers between provinces. She noted that smaller provinces heavily rely on interprovincial trade, making the elimination of internal barriers in these regions more impactful than in larger provinces like Ontario or Alberta.
While industries have long advocated for the removal of internal trade barriers, the movement gained momentum after U.S. President Donald Trump imposed tariffs on Canada, prompting federal and provincial governments to explore domestic trade opportunities. Some provinces, including Ontario and Manitoba, have signed bilateral memorandums of understanding, while a national agreement was reached in November to remove trade barriers on most goods, except alcohol and food.
Despite these advancements, services – which account for the majority of internal trade costs and are crucial for the GDP gains outlined in the report – were largely excluded from the agreement. The report emphasizes finance, telecom, transportation, and professional services as significant sectors that impact businesses’ costs extensively. Planincic stressed that addressing internal trade barriers requires political will and navigating the complexity of thousands of varying rules and regulations across provinces.