The world’s two largest economies, the US and China, are courting each other’s neighbours with defence, trade, and strategic agreements in an attempt to exert pressure and influence on the emerging international order.
On Friday, Canadian Prime Minister Mark Carney hailed a “new strategic partnership” with Beijing during talks with President Xi Jinping—the first visit by a Canadian leader to China in eight years.
The two sides had been locked in diplomatic tensions for years following retaliatory arrests of each other’s citizens and a series of tit-for-tat trade disputes.
In contrast, the US and Japan confirmed on Friday an extension of their joint missile production and defence equipment cooperation, while also enhancing their military presence in the waters to the southwest of mainland Japan, as China continues to ramp up pressure on Tokyo.
Canada-US tensions
The US and Canada have witnessed a deterioration in bilateral ties after US President Donald Trump imposed trade tariffs on Canadian exports and jokingly called for Ottawa to become America’s 51st state. The remarks triggered widespread political backlash in Canada.
Canadian Prime Minister later stated that Canada intended to strengthen ties with Beijing and to diversify its trade relations beyond the United States.
Japan-China tensions
A similar situation is evolving between Japan and China, where Beijing has restricted rare earth mineral supplies to Japan’s automobile industry, prompting Tokyo to bolster ties with the United States.
Japanese Prime Minister Sanae Takaichi’s remarks on Taiwan last year triggered a fierce backlash from Beijing, with some Chinese officials calling for “snake-head” measures (a reference to decapitating threats).
In October, she stated, “Chinese military action around Taiwan could trigger a military contingency or an emergency between Tokyo and Beijing.”
Japan has recently finalised multiple defence agreements with the United States in an effort to counter any potential military action by China in the region.
Beijing has responded by launching a series of military drills near eastern Okinawa and around the Taiwan Strait as a direct signal to both Japan and the United States.
For its part, the United States and Japan also conducted joint military drills near the contested waters, along with a separate exercise around the Korean Peninsula.
The United States arming Taiwan with an $11 billion weapons package has also angered Beijing, prompting escalatory responses from the Chinese Foreign Ministry.
Japan risking major escalation with China
Observers believe that Japan’s current leadership is risking a major escalation with Beijing after the two sides engaged in heated exchanges over the past two months.
Friday’s Tokyo-Washington pact is seen as another escalatory move in the rapidly evolving security landscape in Asia.
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Meanwhile, US Defence Secretary Pete Hegseth praised Japan for its effort, calling the Friday military agreement “hard-nosed realism; a practical, common-sense approach that puts both of our vital national interests together,” said the US Department of Defence.
China has threatened military action against Tokyo if it does not retract the remarks made by PM Takaichi.
Canada’s strategic move
During his address at the Great Hall of the People, Carney said, “Together we can build on the best of what this relationship has been in the past to create a new one adapted to the new global realities.”
While he emphasised agri-tech and energy, an important factor in the bilateral relationship is financial partnership, as Beijing has for decades sought to challenge the dollar by increasing trade with America’s traditional partners.
Welcoming Carney, Xi said that China-Canada relations had reached a turning point at their last meeting on the side-lines of the APEC summit in October.
“It can be said that our meeting last year opened a new chapter in turning China-Canada relations toward improvement,” Xi said.
“The healthy and stable development of China-Canada relations serves the common interests of our two countries,” he said, adding that he was “glad” to see the discussions of the last few months aimed at restoring cooperation.
The US-China economic rivalry’s winner
The US administration has called its tariff imposition one of the best policies in recent decades, though many analysts suggest that the move is likely to backfire significantly, as the trade war and imposition of duties have pushed away US partners who are now reconsidering partnerships with Beijing amid the evolving global order.
What Beijing could not achieve through diplomatic lobbying in decades, the US has effectively handed over, including its major trade partners—such as Canada, Brazil, India, Mexico, South Africa, and several EU nations—to China within a few months.
China, along with Russia, has long been pushing for de-dollarisation, as both nations believe that it allows the US to dictate terms in the international economic order.
Both China and the US are seeking to maintain and extend dominance over their respective spheres of influence, while America recently reaffirmed the entire western hemisphere as its sphere of influence, and China has, since 2020, increasingly asserted dominance in South and Southeast Asia as its own sphere.
In 2025, China strategically "dented" US economic leverage by slashing its treasury holdings to a 17-year low of $682.6 billion.
Simultaneously, it diversified into gold and hit a record $1.19 trillion trade surplus, aggressively reducing its reliance on the US dollar and financial system.
The two countries are locked in an economic and strategic war that is likely to reshape global alliances in the coming decades, with BRICS and the EU emerging as significant contenders challenging the US-led world order.
By Waseem Ahmad Ganie
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