With tariffs on the horizon, conversations around knocking down barriers to interprovincial trade in Canada have intensified within government.

At nearly 20% of GDP today, reform on this front could be the non-monetary stimulus we need, with some economists predicting up to $250B in new GDP from more open internal borders.

The current trade landscape

In combination with the rise of the American economy, the regulatory layers added onto the flow of goods within Canada over the years has resulted in a meaningful deterioration of interprovincial trade in the context of total trade.

Ontario and Quebec remains the most successful trade relationship between provinces, owing mainly to the flow of food, petroleum and coal products, and primary metals.

Looking at the balance of trade highlights the barriers provinces like Alberta and Saskatchewan face when exporting petroleum products and agricultural goods to the rest of Canada.

Whether a lack of adequate infrastructure to transport goods in a cost effective manner, or regulatory issues impeding the flow of agricultural goods - exporting internationally (mainly U.S.) has become the only economically viable option in some cases.

What does breaking down barriers entail?

There are over 600 separate credentialing bodies across provinces - each with their own variations of the same rules that add increased friction to trading with our neighbours.

Packaging may need to vary by province, trucks carrying goods across provincial lines may need to be safety checked multiple times, and equal products may be categorized differently as a result of this excess fine print.

If recent discussion is any indication, progress on harmonizing these regulations could be made fairly quickly.

Protectionist economic policies are another addressable barrier, though they may be more challenging to tackle. Industries like dairy, poultry, and alcohol have strict provincial oversight, limiting the viability of entering new provincial markets.

Logistical barriers will be the most expensive and time consuming to implement, with the obvious candidate being energy infrastructure.

With no cost-effective way to send oil to eastern Canada combined with a lower quality product (categorized as heavy, sour crude versus the ideal light, sweet crude), Canadian oil trades at a persistent discount to global benchmarks.

While it seems Canadians are ready for this to happen, political opposition remains strong, deterring investment in new projects. Focus has shifted to bringing new offshore production capacity online in the east over the coming years instead.

Who could benefit from a more open Canada

We see two distinct categories of companies that would benefit directly from looser restrictions on interprovincial trade: those with end market expansion opportunities and those with supply chain efficiency opportunities.

End market expansion opportunities: These companies would benefit from greater growth prospects within Canada.

• Saputo (SAP), an international supplier of dairy products and the largest in Canada

• Maple Leaf Foods (MFI), an international supplier of prepared meats, poultry and plant-based proteins and the largest food processor in Canada

• Andrew Peller (ADW-A), Canada’s largest publicly traded wine producer

Supply chain efficiency opportunities: These companies would benefit from reduced complexity and compliance costs in their country-wide footprints.

• Loblaw (L), the largest food and pharmacy retailer in Canada, with locations across the country

• Canadian Tire (CTC-A), a leading Canadian retailer of automotive, hardware, sports, leisure, and home products

As a result of a freer flow of goods throughout the country, a number of industries would be well-positioned to experience second-order benefits as well, most notably transportation & logistics names like CN Rail (CNR), Canadian Pacific Kansas City (CPKC), and TFI International (TFII) .