China, global trading partners watch closely as Trump takes on Canada

The current trade war between the United States and Canada marks a significant turning point, with important lessons for China and other key US trading partners, according to analysts and former trade officials. As US President Donald Trump continues his aggressive approach to global institutions, the breakdown in ties between Washington and Ottawa opens another front in the president's disruptive path, potentially fueling a backlash and further distrust towards Beijing.

Wendy Cutler, senior vice-president at the Asia Society Policy Institute, believes that if Canada succeeds in standing up for its national interests amid US retaliation, others may follow a similar "get tough" approach. "Beijing must be enjoying watching the volley of words and actions between Washington and Ottawa," Cutler added, noting that it could prompt China to step up its efforts to woo Ottawa into its sphere of influence.

The collapse of trade talks between Canada and the US late last month, following Canadian Prime Minister Mark Carney's accusation that the US was acting in bad faith, highlights the risks involved. The US countered by accusing Canada of abandoning prior commitments, while Trump dubbed Canadian negotiators "clowns" and "nasty people".

The US has imposed 50 per cent tariffs on some US$20 billion of Canadian imports and threatened to raise tariffs to 50 per cent on steel and auto trades, while also seeking to undermine Canada's French labelling and media content requirements. Canada, whose economy accounts for 8 per cent of the US, has pledged to match the US punitive measures "dollar for dollar" from September 8.

The stakes are enormous, with the US and Mexico accounting for the world's second-largest trade relationship, amounting to US$900 billion annually. As US trade officials weigh in, the situation poses a significant challenge for Canada, whose economy is a fraction of the size of its southern neighbour's.