Not true when it comes to smokes
The price of cigarettes in the border states to Ontario and Quebec are now very comparable to the price within Ontario and Quebec; in some cases they are even higher than they are in these two provinces (I'm talking about New York, Vermont, and Maine here).
When the price differential was large a few years back, there was a big smuggling operation from the US to Canada across the St. Lawrence River, mostly near Cornwall. However, that trade has dried up.
The history is that Ontario and Quebec dropped their taxes on cigarettes significantly after negotiating with the feds to do the same, resulting in a huge price cut in Canada, and esp. in Ontario and Quebec. This was done specifically to remove the economic incentive to cross border cigarette smuggling; the public order problem had become unmanageable, with running battles on the St. Lawrence involving automatic weapons between police and smugglers as well as between different groups of smugglers. It was becoming very risky to boat on that part of the river, and since that area is also a major tourist area, the decision was made to kill the smugglers by rendering the activity unprofitable instead of through interdiction; the lesson of prohibition (where we were the country doing the supplying) was well learned and not forgotten by law enforcement as well as by government.
After that happened, in the US the states won their suit against the tobacco companies (ISTR 300 G$ being the amount won) on the basis of medical expenses or some such, which resulted in the price of smokes skyrocketing as the industry had to hit consumers to pay the legal bill at the same time that these states started charging more taxes on cigarettes to ostensibly cover the increased medical costs that smoking incurs on the part of medical consumers. Since then, Ontario and Quebec have gradually increased the prices over the course of the last four or five years to a point where they brought the price up into the range of that being charged on the other side of the border.
There's more history to it than that, of course; the era of hard core smoke smuggling across The River near Cornhole is as colourful as any other smuggling story (like prohibition, for example). But the economics of it are basically as above.
Right now, smokes cost marginally more in Watertown than they do in Kingston (though perhaps the recent tanking of the US dollar will have changed that). There is no impetus to smuggle across the border anymore.
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