Canada’s economy stands to benefit significantly from the removal of internal trade barriers among its 13 provinces and territories, potentially boosting the real GDP by nearly seven percent, amounting to $210 billion over time, as per a report released 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, indicates that barriers related to regulations are akin to a nine percent tariff on a national scale. In service-oriented sectors such as healthcare and education services, these barriers are even more pronounced, exceeding 40 percent due to strict regulations on professional mobility between provinces.
Comparatively, the authors highlight that such barriers are considerably high in domestic trade agreements, noting that the average U.S. tariff rate on Canada was 5.9 percent in November 2025. The report emphasizes that smaller provinces and northern territories bear a disproportionate impact from these internal trade hindrances, incurring higher costs in contrast to larger provinces with more diversified economies.
The removal of trade barriers is projected to have the most positive impact on the Atlantic provinces, with Prince Edward Island potentially witnessing a significant increase in real GDP per worker by eliminating these internal trade costs. The authors underscore the economic significance of dismantling these barriers, citing it as a powerful tool to enhance productivity, resilience, and foster inclusive growth without substantial fiscal costs.
Alicia Planincic, director of policy and economics at the Business Council of Alberta in Calgary, highlights the fragmented nature of Canada’s economy due to internal trade barriers, referring to it as “10 economies” rather than a unified entity. She stresses that smaller provinces heavily rely on inter-provincial trade and would experience a more substantial economic boost from barrier removal compared to larger provinces like Ontario or Alberta.
Efforts to address internal trade barriers have gained momentum, particularly following trade disputes with the U.S., prompting federal and provincial governments to explore domestic trade opportunities. While some provinces have taken steps towards agreements, the report underscores the need to address service-related barriers, which make up a significant portion of internal trade costs and hold vast potential for GDP growth.
Planincic emphasizes the complexity and multitude of regulations that need to be harmonized across provinces, underscoring the necessity for political will and concerted efforts to navigate the intricate process of aligning rules and regulations to facilitate the removal of internal trade barriers.