Canada’s economy could see a potential increase of nearly seven percent, equivalent to $210 billion in real GDP over time, by eliminating internal trade barriers across the country’s 13 provinces and territories, 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, estimates that regulation-related barriers equate to a national tariff of approximately nine percent on average.
In sectors like healthcare and educational services, where professional mobility between provinces is heavily regulated, the potential tariff could exceed 40 percent. This level of barrier is considered high compared to typical international trade agreements. For perspective, the Bank of Canada reported that the U.S. imposed an average tariff rate of 5.9 percent on Canada in November 2025.
The report highlights that smaller provinces and northern territories bear a disproportionate impact from internal trade barriers, incurring higher costs compared to larger provinces with more diversified economies. This situation creates an economic landscape where geographical location and regulatory restrictions jointly influence opportunities, diminishing the advantages typically associated with economies of scale.
According to the report, the removal of trade barriers would particularly benefit the Atlantic provinces, with Prince Edward Island potentially experiencing a nearly 40 percentage point increase in real GDP per worker by eliminating these internal costs. The authors stress that internal barriers remain significant, economically burdensome, and increasingly mismatched with the requirements of a modern service-oriented economy. Removing these barriers presents a potent and cost-effective means to enhance productivity, bolster resilience, and promote inclusive growth.
Alicia Planincic, Director of Policy and Economics at the Business Council of Alberta, remarked that due to the existing trade barriers between provinces, Canada essentially operates as ten separate economies rather than one cohesive entity. Smaller provinces rely more heavily on interprovincial trade, making the removal of internal barriers in these regions more impactful compared to provinces like Ontario or Alberta.
The report emphasizes that internal trade barriers primarily affect service industries, which constitute the majority of internal trade costs and are projected to contribute about 80% of the GDP gains outlined in the report. Sectors such as finance, telecom, transportation, and professional services have broad-reaching impacts on the economy, increasing costs for all businesses involved. Ultimately, addressing internal trade barriers falls to the provinces, requiring both political will and complex coordination due to the multitude of rules and regulations varying from province to province.