U.S. President Donald Trump could slap tariffs on Canada as early as next week and Ottawa is already preparing a response to the threat from Washington.
In addition to retaliatory tariffs, Canada’s plan includes boosting trade between Canadian provinces, which some experts say could help mitigate some of the worst effects of Trump’s tariffs.
Matthew Holmes, executive vice-president and chief of public policy at the Canadian Chamber of Commerce, said, “There’s work you can do at home to actually make Canadians have a stronger economy at home. So we’re not as reliant and exposed to the U.S. market.”
Holmes said that while fixing Canada’s internal trade barriers won’t happen overnight, it could help Canada during a trade battle with the U.S.
“Over time, addressing internal trade in Canada could offset the risk or the damage we might face from broad tariffs from the United States,” he said.
Speaking to reporters in Washington, D.C., on Friday, Foreign Affairs Minister Melanie Joly said removing trade barriers was going to be part of Canada’s response to Trump’s threat.
The 2024 fall economic statement noted International Monetary Fund data that, “Canada could increase its GDP per capita by as much as 4 per cent—or $2,900 per capita estimated in 2023 dollars through liberalization of internal trade in goods.”
Holmes said, “Canadians would be very surprised to learn that there’s something called the Canada Free Trade Agreement between Canada and the provinces. It has almost 400 pages of carve-outs and exceptions to free trade in Canada.”
So, which specific trade barriers do expert say need to be tackled?
Holmes told Global News that it is difficult to create pan-Canadian supply chains because of different requirements and regulations.
“There are things like food containers and sizes. They’re different in different provinces,” he said.
Dennis Darby, president and CEO of Canadian Exporters and Manufacturers, said the barriers to trade between provinces “are not about dollars.”
“They’re about regulations and rules and requirements,” he said.
“Often there are regulatory requirements at a local, provincial and federal level to get a new project [off the ground]. That delays investment and to a degree discourages investment [in Canada].”
Holmes said Canada has shown that it can dismantle redundant regulations.
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“It used to be that in Canada we had multiple laws about what needs to be in a first aid kit. It wasn’t that you needed different things to save a Manitoban’s life versus a Quebecer’s life. But we had different rules about what needed to be included in there,” he said.
“Procurement companies had to create different kits for different provinces and jurisdictions,” he said, adding that removing those inconsistencies has helped companies that work in the health care sector.
Fen Osler Hampson, co-chair of the Expert Group on Canada-US Relations at Carleton University, said Canadian provinces also have asymmetrical labour regulations on who can work in which province.
“If you’re a tradesman in Ontario, let’s say you’re living in Ottawa. You cannot go and market your skills on the other side of the Ottawa River [in Quebec],” he said, “although Ontario does allow Quebecers to cross the river and work on the other side so they’re not always symmetrical restrictions.”
However, Holmes said some regulations may not be so easily dismantled.
“When you’re talking about safety standards, housing codes and professional designations – some of that will take some time.”
According to industry groups, one of the biggest impediments to trade is the fact that there are different regulations around Canada’s transportation sector.
Some provinces allow double tandem trailers where others do not, among other restrictions on things like weight as well.
Holmes said the smallest regulatory details, such as the size of truck tires, the weight and cargo loads you’re allowed to carry across a provincial line, can also cause delays.
“It is one of the reasons you see all those truck waiting stations when you’re driving on the highway. It is to comply with a provincial law. All those things add cost. They add time and they create redundancy within our system,” he said.
Matt Poirier, vice-president of the Retail Council of Canada, said the country’s retail sector has felt the pinch of inconsistent transport policy and stoppages at Canada’s ports and railways and with the Canada Post strike over recent years.
“We need to have a smooth-moving transportation system so that our supply chains keep moving and keep efficient,” he said.
Hampson said some provinces have long been reluctant to break down trade barriers because they want to protect their businesses.
One sector where this is most evident is the sale and distribution of alcohol in Canada, Holmes added.
“The sales of alcohol, the warehousing and the control of alcohol in Canada is held by the provinces,” he said.
He added that even in provinces like Alberta, where private sellers of alcohol are prominent, the province still controls the alcohol that comes in and how it’s purchased.
In provinces like Ontario, the province has a near-monopoly.
That can often prevent small business owners like Matt Tweedy from scaling up. Tweedy is the co-founder of the Tooth and Nail Brewing Company based in Ottawa.
Tweedy’s company is based in Ottawa’s Hintonburg neighbourhood, a stone’s throw from the provincial boundary between Ontario and Quebec.
Quebec’s provincial regulations mean he can’t sell his beer across the Ottawa River, despite the demand.
“We ran into a situation a few years ago where a friend was getting married on the Quebec side of a particular structure that straddles Ontario and Quebec. We couldn’t sell beer to his wedding. They weren’t aware that this was the law when they booked the location,” he said.
Poirier said there is also a lot of provincial revenue tied to some trade barriers. For this to work, Poirier said governments would either have to compensate each other for the loss in revenue or decide that the benefits outweigh the costs.
“I don’t think we’re there yet,” he said.
–with files from Global’s Touria Izri
