????The Upside of Trump: Improving Business and Trade Within Canada

One unexpected consequence of the Trump Administration’s trade policies was that it forced Canadian policymakers to take a hard look at the country’s own internal trade barriers. While much attention is given to external trade relationships, Canada’s internal trade barriers are a major drag on economic growth, costing businesses billions in inefficiencies and lost opportunities.

Studies estimate that trade restrictions between provinces increase the cost of goods by an average of 30%, with some regions—particularly in the North—seeing trade costs exceeding 60% due to regulatory fragmentation, infrastructure deficits, and geographic obstacles (Tombe & Winter, 2013; Alvarez et al., 2019).

Eliminating these barriers could boost GDP per capita by 4% and improve business competitiveness, according to economic analyses (Albrecht & Tombe, 2016). Yet, internal trade remains largely overlooked in Canada’s broader economic strategy, even as the country faces increasing global protectionism and shifting trade dynamics with its largest trading partner, the United States.

??The Urgency of Strengthening Internal Trade in a Protectionist Era

Canada’s reliance on the United States for trade is staggering: ?? $3.6 billion worth of goods and services cross the border daily ?? Over 63% of Canada’s total trade is with the U.S. ?? The U.S. is both Canada’s largest investor and top export destination

While this deep integration benefits both economies, Canada’s economic resilience is at risk as U.S. trade policy becomes increasingly protectionist. With policies such as Buy American, tariffs, subsidies from the Inflation Reduction Act, and shifting energy security strategies, Canada must reduce internal inefficiencies and create a stronger domestic trade network to mitigate external shocks.

Interprovincial trade reform is not just an economic opportunity—it’s a national security and resilience strategy in a world where global trade alliances are shifting rapidly.

??How to Fix Interprovincial Trade in Canada

1. Streamline Provincial Regulations

One of the biggest barriers to internal trade is regulatory misalignment, where businesses must comply with different rules for the same goods and services in different provinces. This adds costs, delays, and administrative burdens.

? Solution: Implement mutual recognition agreements, allowing provinces to accept each other’s certifications and regulatory standards instead of duplicating them.

2. Invest in Critical Infrastructure

Trade costs are disproportionately high in remote regions, where lack of roads, rail, and digital connectivity drives up transportation and logistics costs. In Nunavut, for example, trade costs exceed 60% of the value of goods.

? Solution: Build a Northern Transportation Corridor to connect resource-rich and isolated provinces to national and international markets, ensuring more cost-efficient supply chains and economic inclusion.

3. Strengthen Provincial Trade Agreements

While agreements like the Canadian Free Trade Agreement (CFTA) have reduced some barriers, they lack strong enforcement mechanisms. Some provinces continue to impose protectionist policies, particularly in sectors like energy, construction, and alcohol distribution.

? Solution: Expand sector-specific trade liberalization, focusing on industries that are highly interconnected across provincial borders, such as manufacturing, clean energy, and professional services.

4. Increase Federal-Provincial Coordination

Canadian provinces often act independently, prioritizing local industries over national economic efficiency. This weakens Canada’s ability to negotiate from a position of strength globally.

? Solution: Establish a Federal-Provincial Task Force on Trade Resilience, ensuring nationally aligned economic strategies that reduce provincial competition and inefficiencies.

5. Enable a Data-Driven Approach to Trade Policy

Despite its economic importance, there is limited real-time data on interprovincial trade flows and regulatory impacts. This lack of transparency makes it difficult to implement evidence-based reforms.

? Solution: Create a national trade data hub, tracking internal trade trends, barriers, and economic performance, similar to what exists for international trade.

??The Future of Trade: A Stronger, More Resilient Canada

By eliminating internal trade inefficiencies, Canada can: ?? Increase productivity and GDP growth ?? Strengthen economic resilience amid U.S. and global protectionism ?? Enhance competitiveness in North American and global markets

The research is clear: A Canada without internal trade barriers is a more prosperous, resilient, and competitive nation. The real question is, will policymakers act?

?? What do you think? Which internal trade barriers do you see as the biggest obstacles to Canada’s economic success? Let’s discuss. ??

Sources:

• Albrecht & Tombe (2016) – Internal Trade, Productivity, and Interconnected Industries
• Alvarez et al. (2019) – Internal Trade Barriers and Economic Impact
• Beaulieu & Zaman (2019) – Provincial Trade Agreements and Trade Flow
• Bemrose et al. (2020) – Provincial Non-Tariff Trade Barriers and Border Effects
• Fellows & Tombe (2018) – Trade Costs in Canada’s Northern Territories
• Tombe & Winter (2013) – Impact of Internal Trade Barriers on Productivity

Peggy Van de Plassche is a seasoned advisor with over 20 years of experience in financial services, healthcare, and technology. She specializes in guiding boards and C-suite executives through transformational change, leveraging technology and capital allocation to drive growth and innovation. A founding board member of Invest in Canada, Peggy also brings unique expertise in navigating complex issues and fostering public-private partnerships—key elements in shaping the Future of Business. Her skill set includes strategic leadership, capital allocation, transaction advisory, technology integration, and governance. Notable clients include BMO, CI Financial, HOOPP, OMERS, GreenShield Canada, Nicola Wealth, and Power Financial. For more information, visit peggyvandeplassche.com.