A recent report by the International Monetary Fund (IMF) suggests that Canada’s economy could see a substantial boost of nearly seven percent, equivalent to $210 billion in real GDP, if all internal trade barriers among the country’s 13 provinces and territories were eliminated. The report, co-authored by IMF researchers Federico J. Diez and Yuanchen Yang with contributions from University of Calgary economist Trevor Tombe, estimates that these barriers currently impose an average national tariff of about nine percent.
In certain service-oriented sectors such as healthcare and educational services, the internal trade barriers amount to over 40 percent, significantly impacting professional mobility between provinces. The report highlights that this level of restriction would be considered prohibitive in many international trade agreements. For comparison, the Bank of Canada reported that the U.S.’s average tariff rate on Canada was 5.9 percent in November 2025.
The report underscores that smaller provinces and territories, as well as northern regions, bear a disproportionate burden from internal trade barriers, facing higher costs compared to larger provinces with more diverse economies. This creates an economic landscape where geography and regulations together influence opportunities, diminishing the advantages typically associated with economies of scale.
According to the report, the Atlantic provinces, particularly Prince Edward Island, would experience significant economic gains by eliminating these trade barriers. The movement to remove internal trade barriers gained momentum following trade tensions with the U.S., prompting federal and provincial governments to explore domestic trade opportunities.
While some provinces like Ontario and Manitoba have already taken steps to address internal trade barriers through bilateral agreements, a national agreement was reached in November to drop barriers on most goods, excluding food and alcohol. However, services, which contribute the majority of internal trade costs and are expected to drive about four-fifths of the GDP gains, were largely excluded from this agreement.
The report emphasizes the need to address barriers in sectors such as finance, telecom, transportation, and professional services, which have widespread impacts on businesses and raise overall costs in the economy. The authors assert that removing internal trade barriers presents a significant opportunity to enhance productivity, bolster resilience, and promote inclusive growth without substantial fiscal costs.