IMF says Canada could gain nearly 7% in real GDP by eliminating internal trade barriers

Canada’s economy could boost real gross domestic product by nearly seven per cent, or $210 billion, by completely removing internal trade barriers between the country’s 13 provinces and territories, according to a report published Tuesday by the International Monetary Fund (IMF).

The report estimates that, on average, barriers are equivalent to nine per cent tariffs at the national level, which was authored by IMF researchers Federico J., with contributions from University of Calgary economist Trevor Tombe. It was co-written by Diaz and Yuanchen Yang.

This prospective tariff is even higher – over 40 percent – ​​in service-oriented sectors such as healthcare and educational services where professional mobility between provinces is highly regulated.

“Such a level would be prohibitive in most international trade agreements,” the authors wrote. for comparison, Bank of Canada estimates The average US tariff rate on Canada in November 2025 was 5.9 percent.

The report also notes that smaller provinces and northern regions are disproportionately affected by internal trade barriers, and face higher costs than larger provinces with diverse economies.

“The result is a patchwork economy where geography and regulation jointly shape opportunity – and where the advantages that typically come with scale are muted,” the report said.

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According to the report, Atlantic provinces will benefit the most from the removal of trade barriers. It said Prince Edward Island specifically would save about 40 percentage points in real GDP per employee by removing those internal trade costs.

While some industries have been pushing for the removal of internal trade barriers for years, the movement gained widespread recognition last year after U.S. President Donald Trump imposed tariffs on Canada, forcing both federal and provincial governments to seek more trade opportunities.

To date, some provinces, such as Ontario and Manitoba, have signed Bilateral Memorandum of Understanding. The issue escalated to a national level in November when the federal government, provinces and territories signed an agreement Removal of trade barriers on most goods except alcohol and food.

However, according to the IMF, services – which make up the bulk of internal trade costs, and which account for about four-fifths of the GDP gains cited in the report – were largely exempted from that agreement.

The report points to finance, telecommunications, transportation and professional services as far-reaching sectors that “disrupt the economy” and raise costs for all businesses they touch.

“The evidence is clear: internal barriers are large, economically costly, and ill-suited to the needs of a modern, vibrant, service-intensive economy,” the authors wrote.

“Removing them provides the most powerful – and least financially costly – lever to increase productivity, strengthen resilience and support inclusive growth.”