An In-Depth Analysis

January 29, 2026

Executive Summary

The escalating tensions between the United States and Canada under the Trump administration represent a watershed moment in global geopolitics, with profound implications for middle powers like Singapore. Canadian Prime Minister Mark Carney’s speech at Davos 2026, which declared a “rupture” in the rules-based international order, has crystallized a new framework for how middle powers should navigate an increasingly transactional and unpredictable great power rivalry.

For Singapore, a trade-dependent city-state that has prospered under the post-war liberal order, the US-Canada friction serves as both a warning and a roadmap. This analysis examines the current state of US-Canada relations, Singapore’s vulnerabilities and strategic options, and the potential for middle power coalitions to reshape the emerging multipolar order.

1. The US-Canada Rupture: Context and Timeline

The Trade War Escalation

The relationship between the United States and Canada has deteriorated dramatically since President Donald Trump’s second inauguration in January 2025. What began as typical trade rhetoric has evolved into an unprecedented assault on a NATO ally and America’s closest economic partner.

By August 2025, Trump had raised tariffs on Canadian goods to 35% from an initial 25%, targeting steel, copper, automobiles, and auto parts. While most Canadian exports remain duty-free under the Canada-U.S.-Mexico Agreement (CUSMA), these targeted tariffs have caused significant economic disruption. More alarmingly, Trump has repeatedly suggested that Canada should become the “51st state” of the United States, treating Canadian sovereignty as negotiable.

The China Deal Controversy

The immediate trigger for the latest escalation was Canada’s trade agreement with China in January 2026. Under this arrangement:

• Canada agreed to allow 49,000 Chinese electric vehicles into its market annually at a reduced tariff rate of 6.1%, down from the 100% tariff imposed in October 2024
• China would cut tariffs on Canadian canola seed oil to 15% from 85%, and remove anti-discrimination tariffs on canola meal, lobsters, crabs, and peas through at least the end of 2026
• The deal was limited in scope, covering specific agricultural and automotive sectors rather than constituting a comprehensive free trade agreement

Trump’s response was swift and severe. On January 24, 2026, he threatened to impose 100% tariffs on all Canadian goods if the China deal proceeded, claiming that Canada would become a “drop off port” for Chinese goods entering the United States. He warned that “China will eat Canada alive, completely devour it, including the destruction of their businesses, social fabric, and general way of life.”

The Davos Confrontation

The conflict reached its symbolic peak at the World Economic Forum in Davos, Switzerland, in January 2026. On January 20, Prime Minister Carney delivered a landmark speech that redefined Canada’s strategic posture and issued a clarion call to middle powers worldwide.

Carney declared: “We are in the midst of a rupture, not a transition.” Without naming Trump directly, he argued that the rules-based international order had fundamentally broken down, with great powers now using “economic integration as weapons. Tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited.”

Most memorably, Carney warned: “The middle powers must act together because if we’re not at the table, we’re on the menu.”

Trump responded the following day in his own Davos speech: “Canada lives because of the United States. Remember that, Mark, the next time you make your statements.” He subsequently withdrew Canada’s invitation to join his proposed “Board of Peace” for Gaza reconstruction, further isolating a traditional ally.

2. Singapore’s Vulnerabilities in the New Order

Trade Dependence and Economic Exposure

Singapore’s vulnerability to the collapse of the rules-based order cannot be overstated. As one of the world’s most trade-dependent economies, with a trade-to-GDP ratio exceeding 300%, Singapore has built its prosperity on open markets, stable supply chains, and predictable international rules.

The city-state faces a paradox in its relationship with the United States. Despite running a trade deficit with Washington—the U.S. enjoyed a goods trade surplus of $2.8 billion with Singapore in 2024, an 84.8% increase from the previous year—Singapore was still hit with a 10% baseline tariff under Trump’s “reciprocal tariff” scheme announced in April 2025. This baseline rate could potentially rise to 25% under certain conditions, with a penalty rate of 40% for goods deemed to have been transshipped to evade tariffs.

High-Value Sector Risks

Singapore’s economy is particularly vulnerable in several high-value sectors:

• Semiconductors and Electronics: These constitute a significant portion of Singapore’s exports. Trump’s August 2025 announcement of a 100% tariff on semiconductor imports (except for companies manufacturing in the U.S. or committed to doing so) poses an existential threat to this sector.
• Pharmaceuticals: As a major pharmaceutical manufacturing and export hub, Singapore faces significant exposure to U.S. tariff volatility.
• Port and Logistics Services: As the world’s second-busiest container port after Shanghai, Singapore’s transshipment role could be undermined by protectionist policies targeting goods that pass through the city-state.

Singapore’s Official Response

Singapore’s leadership has responded to Trump’s tariffs with measured but increasingly firm language. In an April 2025 ministerial statement to Parliament, Prime Minister Lawrence Wong criticized the American tariffs as “not actions one does to a friend,” noting that Singapore maintains zero tariffs on U.S. goods under their existing free trade agreement.

Wong argued that Trump’s tariffs represented not a reform of the global trade order but “a repudiation of the very system the US once championed.” He emphasized that if tariffs were truly reciprocal and targeted only countries with trade surpluses, “the tariff for Singapore should be zero.”

Deputy Prime Minister Gan Kim Yong, who also serves as Minister for Trade and Industry, warned in March 2025 that “many of us here in Asia watch with anxiety President Donald Trump’s tariffs.” He noted that even if not all of Asia is directly affected, rising tariffs and trade wars could cause major disruptions to supply chains and “significantly set back the growth of the global economy.”

The Strategic Dilemma

Singapore faces a fundamental strategic dilemma. The United States is the largest source of foreign direct investment in Singapore, and the city-state hosts thousands of American companies that use it as their Asia-Pacific headquarters. Singapore also enjoys robust military ties with Washington, even without being a formal U.S. defense treaty ally.

Simultaneously, China represents Singapore’s largest trading partner in Asia and a crucial economic relationship. Singapore is among the top sources of foreign direct investment in China. A conflict between the U.S. and China—particularly over Taiwan—would be catastrophic for Singapore’s model of maintaining positive relations with all major powers.

3. The Middle Power Coalition: Carney’s Vision

Value-Based Realism

At the heart of Carney’s Davos speech was a new strategic framework he called “value-based realism,” which he credited to Finnish President Alexander Stubb. This approach seeks to be both principled and pragmatic:

• Principled in commitment to fundamental values: sovereignty and territorial integrity, prohibition of the use of force except when consistent with the UN Charter, and respect for human rights.
• Pragmatic in recognizing that progress is often incremental, that interests diverge, and that not every partner will share all values.

Variable Geometry: Coalition Building

Carney outlined an ambitious program of “variable geometry”—different coalitions for different issues based on common values and interests. Canada’s concrete initiatives include:

• A comprehensive strategic partnership with the European Union, including joining SAFE, Europe’s defence procurement arrangements
• Strategic partnerships with China and Qatar
• Free trade negotiations with India, ASEAN, Thailand, Philippines, and Mercosur
• Twelve trade and security deals across four continents signed in the six months preceding Davos

Notably, Carney specifically mentioned Canada’s intent to finalize a free trade agreement with ASEAN in 2026, which would directly benefit Singapore as ASEAN’s most developed economy and a natural partner for Canadian investment.

Global Resonance

Carney’s speech resonated powerfully across the middle power spectrum. At Davos, Singapore President Tharman Shanmugaratnam echoed similar concerns, warning of “disregard for the UN Charter” and “erosion of the norms, conventions and trust built up over 80 years,” with the risk of “a self-reinforcing decline into disorder.”

Tharman’s response to the crisis, however, was characteristically measured and pragmatic. He argued: “Collective problems require collective solutions and everyone has to pitch in with the right burden sharing.” Crucially, he advised against abandoning the existing system entirely: “Build up the plurilateral alliances but do not repudiate Plan A.”

This reflects Singapore’s traditional approach—hedging rather than choosing sides, building new partnerships without burning bridges with existing ones.

4. Singapore’s Strategic Options and Response

Diversification and Resilience

In October 2025, Singapore’s Ministry of Foreign Affairs released an addendum describing the global transition from “the post-Cold War order” to “a more uncertain era.” This new era, according to the MFA, includes “disruptions to global trade,” “weaponisation of economic tools,” “weakening multilateralism,” “rapid technological change,” and “rising risks of conflicts.”

The document effectively acknowledged that the United States is no longer willing to underwrite the global order and has weaponized trade—a remarkable statement from a country that has historically been one of Washington’s closest partners in Southeast Asia.

Singapore’s response strategy centers on several key pillars:

• Regional Economic Integration: Championing deeper cooperation through ASEAN, the Regional Comprehensive Economic Partnership (RCEP), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
• Middle Power Partnerships: Expanding engagement with Australia, New Zealand, Japan, South Korea, and India, while fostering closer relations with countries in Central Asia, Africa, and Latin America.
• Enhanced Strategic Partnership with Australia: During Prime Minister Wong’s visit to Australia in October 2025, both countries announced an enhanced version of their comprehensive strategic partnership established in 2015.
• ASEAN-Canada FTA: Active pursuit of the Canada-ASEAN free trade agreement, which Carney and Wong discussed during Carney’s October 2025 visit to Singapore. Singapore is Canada’s largest source of foreign direct investment from Southeast Asia, with $7.8 billion invested in 2024.

The Hedging Imperative

Despite these new partnerships, Singapore has been careful not to alienate the United States entirely. As Foreign Minister Vivian Balakrishnan stated: “We cannot be bullied or bought… It is a big advantage for Singapore not to have to beg for aid. We have no need for assistance or loans that will subject us to pressure… We are not dependent on any single external partner.”

Singapore has held off from imposing retaliatory tariffs against the United States, instead maintaining diplomatic engagement while preparing the nation for “economic setbacks and a dangerous external environment ahead.” This approach reflects Singapore’s recognition that completely abandoning the U.S. relationship would be strategically unwise, even as Washington becomes less reliable.

Business and Supply Chain Adaptation

At the corporate level, Singapore-based businesses are implementing several mitigation strategies:

• Supply Chain Diversification: Reducing over-reliance on single trading partners and expanding into emerging markets.
• Rules of Origin Compliance: Undertaking detailed examinations of country of origin matters to accurately assess tariff exposure and reduce transshipment penalties.
• Frontloading Exports: Some exporters have accelerated shipments to the U.S. ahead of anticipated tariff increases.
• Active Policy Monitoring: Continuous tracking of U.S. trade policy developments to enable rapid adjustments.

5. Broader Implications and Analysis

The Paradox of Economic Coercion

One of the most striking aspects of Trump’s approach is that he has weaponized economic tools most aggressively against America’s closest allies rather than adversaries. As noted in Carnegie Endowment analysis, this is actually consistent with international relations literature—tools of economic coercion are most effective when used against diplomatic partners and allies, who have more to lose from the breakdown of cooperation.

Trump has imposed major steel, aluminum, and auto penalties against the EU, Canada, and Japan; threatened to dissolve NATO; and mused about making Canada the 51st state. Meanwhile, despite tough rhetoric toward China, the U.S. and China have maintained a relatively stable trade truce since their leaders’ meeting in South Korea in October 2025.

This pattern reveals a deliberate strategy: Trump seeks to break up international organizations and impose a new U.S. sphere of influence that gives America “unfettered primacy.” Coercing allies is a logical step in this bid to reshape the international order.

The Limits of Middle Power Solidarity

While Carney’s call for middle power cooperation has resonated widely, significant challenges remain:

• Security Dependencies: Most Western middle powers—including Canada, Australia, and European nations—remain heavily dependent on the United States for security and seek to maintain their alliances with Washington, even as they hedge against American unpredictability.
• North-South Divides: Middle powers are heterogeneous, and countries of the Global North and South often disagree on global priorities and fundamental issues of international institutional reform.
• Defense Gaps: As Carney himself acknowledged, current defense arrangements like NATO cannot organize or mount effective defense against a determined aggressor without American leadership. European talk of “strategic autonomy” remains aspirational.
• Time Horizons: Building solidarity and common purpose across these divides will be the work of years, not months.

China’s Calibrated Response

Beijing has watched the US-Canada friction with interest but has responded cautiously. Chinese officials have sought to project stability in ties with Washington, with Vice Minister of Commerce Dong Yan stating that China is “willing to work with the U.S. to manage differences and deepen cooperation to ensure a stable and healthy bilateral relationship.”

China appears to be betting that Trump’s threats—whether the 100% tariffs on Canada or other pronouncements—will not be fully enforced in ways that meaningfully harm Chinese interests. Both sides are focused on maintaining plans for a leaders’ meeting in April 2026.

Chinese leaders likely welcome the opening created by Carney’s engagement and trade deal but recognize the limits to how far Canada can pivot away from its deep ties with Washington. The principle guiding China’s approach appears to be: “Never interrupt your adversary when he is making a mistake.”

Singapore’s Unique Position

Singapore occupies a unique position in this evolving landscape. Unlike Canada, which shares a land border and massive trade dependence with the United States, Singapore has:

• Greater Strategic Flexibility: As an island nation with no territorial disputes and strong historical, economic, and cultural linkages to multiple great powers, Singapore can more easily maintain multidirectional relationships.
• Economic Self-Reliance: Unlike many countries, Singapore neither requires foreign aid nor is vulnerable to loan-based coercion. This financial independence enhances its agency.
• Institutional Leverage: As the de facto leader of ASEAN economic initiatives and a connector between multiple regional frameworks (RCEP, CPTPP), Singapore can shape coalitions in ways that serve its interests.

However, Singapore also faces unique vulnerabilities. Its extreme trade dependence (300%+ trade-to-GDP ratio) means that global trade disruptions hit harder. A Taiwan conflict would be catastrophic for Singapore given its deep economic ties to both the U.S. and China.

6. Potential Scenarios and Strategic Pathways

Scenario 1: Managed Multipolar Competition

Description: The United States, China, and other major powers establish tacit rules for competition that avoid direct confrontation. Middle powers successfully create functional plurilateral arrangements that address specific issues (trade, climate, technology standards) without formally replacing the UN-centered system.

Singapore’s Role: Acts as a convener and connector, hosting negotiations and serving as neutral ground for dialogue. Continues to prosper as a hub by being indispensable to multiple power centers.

Probability: Moderate. Requires restraint from major powers and successful coalition-building by middle powers.

Scenario 2: Bloc Formation and Fragmentation

Description: The world splits into competing economic and security blocs—a U.S.-led sphere, a China-led sphere, and potentially a European/middle power coalition. Trade, technology, and investment flows become increasingly restricted across bloc boundaries.

Singapore’s Role: Faces excruciating pressure to choose sides. Attempts to maintain neutrality but sees economic opportunities diminish as global trade contracts. May need to join a middle power bloc for protection.

Probability: Moderate to High. Current trends point in this direction, though complete bloc formation faces practical obstacles.

Scenario 3: U.S. Unilateral Dominance

Description: The Trump administration successfully coerces allies into accepting American terms through tariff threats and security abandonment. China is contained or collapses economically. Middle power coalitions fail to materialize due to internal divisions and U.S. pressure.

Singapore’s Role: Accepts subordinate status in a U.S.-dominated order, paying economic tributes (accepting unfavorable trade terms) in exchange for security guarantees and market access.

Probability: Low to Moderate. Would require sustained U.S. willingness to enforce costly sanctions and China’s economic model to fail.

Scenario 4: Great Power Conflict

Description: Military conflict erupts between major powers, most likely over Taiwan. Economic interdependence unravels completely. Global trade and investment collapse.

Singapore’s Role: Faces catastrophic economic damage regardless of whether it remains neutral or takes sides. Survival depends on rapid economic restructuring and finding new sources of trade and investment.

Probability: Low but rising. Miscalculation or accident could trigger escalation that no party initially wanted.

7. Recommendations for Singapore

Short-Term Priorities (2026-2027)

• Accelerate the Canada-ASEAN FTA: Complete negotiations quickly to create concrete institutional ties with Carney’s middle power coalition while demonstrating that Singapore takes the “variable geometry” approach seriously.
• Deepen Coordination with Like-Minded Middle Powers: Establish regular consultations with Australia, Canada, Japan, and South Korea on coordinated responses to great power coercion. Create informal coordination mechanisms that don’t require formal treaty structures.
• Maintain Open Channels with Washington: Despite tensions, continue high-level dialogues and avoid retaliatory measures that would definitively break the relationship. The U.S. remains too important economically and strategically to completely alienate.
• Prepare for Economic Volatility: Build up fiscal reserves, support businesses in supply chain diversification, and develop contingency plans for various tariff scenarios.

Medium-Term Strategies (2027-2030)

• Strengthen ASEAN Institutional Capacity: Lead efforts to make ASEAN more effective in responding collectively to external pressure. This includes improving decision-making processes and creating mechanisms for burden-sharing on defense and security issues.
• Invest in Strategic Industries: Reduce vulnerability in critical sectors by diversifying customer bases, developing domestic capabilities where possible, and creating strategic stockpiles of essential inputs.
• Build Digital and Green Technology Leadership: Position Singapore as indispensable in emerging technology standards and green transition, making the city-state valuable to all major powers regardless of bloc formation.
• Develop Alternative Payment Systems: Reduce vulnerability to financial coercion by participating in multilateral payment systems that bypass U.S.-dominated infrastructure when necessary.

Long-Term Vision (2030 and Beyond)

• Champion a New Framework for International Economic Governance: Work with other middle powers to develop and institutionalize rules for a multipolar trading system that protects small states from coercion.
• Cultivate Strategic Indispensability: Ensure Singapore remains critical infrastructure for global finance, trade, and diplomacy—making it too costly for any major power to exclude or punish.
• Prepare for Multiple Futures: Maintain flexibility to adapt to whichever scenario materializes, avoiding irreversible commitments that would lock Singapore into a single path.

Conclusion: Singapore at the Crossroads

The US-Canada friction represents far more than a bilateral dispute—it is a symptom of the fundamental transformation of the international order. Mark Carney’s warning that “the middle powers must act together because if we’re not at the table, we’re on the menu” is not hyperbole. It reflects the hard reality that in a world of unconstrained great power rivalry, middle powers face existential choices.

For Singapore, the stakes could not be higher. The city-state’s entire development model has been premised on an open, rules-based international system. The erosion of that system threatens Singapore’s prosperity, security, and perhaps even its sovereignty. At the same time, Singapore cannot simply replace its relationship with the United States with China, nor can it retreat into isolation.

The path forward requires what Tharman Shanmugaratnam described as building up plurilateral alliances without repudiating the existing system entirely. This means:

• Actively participating in Carney’s “variable geometry” coalition-building while maintaining as many relationships with major powers as possible
• Leading ASEAN toward greater effectiveness and coherence as a collective actor
• Investing in capabilities that make Singapore indispensable across multiple domains
• Preparing for volatility while working to shape outcomes that preserve as much of the open system as possible

The US-Canada confrontation has provided a preview of the new world order—one where even America’s closest allies are subjected to economic coercion and where traditional assumptions about partnership and shared values no longer hold. Singapore must learn from Canada’s experience: the rules-based order is indeed ruptured, nostalgia is not a strategy, and sovereignty in the 21st century means resilience, not retreat.

As Prime Minister Lawrence Wong stated, “we are entering a new phase in global affairs, one that is more arbitrary, protectionist and dangerous.” Singapore’s response must be proportionate to this challenge—principled in defending its interests and values, pragmatic in recognizing the limits of its power, and creative in finding new pathways to prosperity and security in an increasingly turbulent world.

Appendix: Key Data and Timeline

Timeline of US-Canada-Singapore Developments

Date	Event
Jan 2025	Trump inaugurated for second term
Apr 2025	Trump announces 10% baseline tariff on Singapore; PM Wong condemns as “not actions one does to a friend”
Aug 2025	Trump raises Canadian tariffs to 35%; announces 100% tariff on semiconductors
Oct 2025	PM Carney visits Singapore; discusses Canada-ASEAN FTA with PM Wong; Singapore-Australia enhanced strategic partnership announced
Jan 16, 2026	Canada-China trade agreement announced (EVs and agricultural products)
Jan 20, 2026	Carney delivers “rupture” speech at Davos; Tharman echoes concerns about erosion of international norms
Jan 21, 2026	Trump responds: “Canada lives because of the United States”
Jan 23, 2026	Trump withdraws Canada’s invitation to Board of Peace
Jan 24, 2026	Trump threatens 100% tariffs on Canada over China deal

Key Economic Data

Metric	Value
Singapore Trade-to-GDP Ratio	>300%
US-Singapore Trade Balance (2024)	$2.8B US surplus (+84.8% YoY)
Canadian FDI in Singapore (2024)	$7.8B
Singapore Tariff on US Goods (FTA)	0%
US Tariff on Singapore (Current)	10% baseline (potential 25-40%)
Canadian Tariff on Most Goods	35% (steel, copper, autos targeted)