Canada is performing the acrobatic act of the modern middle power: trading with China while tightening security ties with partners it trusts more.
That balance was on display Jan. 27, when Defence Minister David McGuinty signed an Equipment and Technology Transfer Agreement with Japan, a fellow G7 member and key regional ally.
The deal makes it easier for Canadian and Japanese companies to transfer defence equipment, technology or intellectual property. It is expected to open a new supply channel for the Canadian Armed Forces.
“Strengthening our security and defence cooperation in the Indo-Pacific region is essential,” McGuinty said in a press release accompanying the announcement.
“As Canada makes generational, long‑term investments in the Canadian Armed Forces, agreements with trusted partners like Japan are more important than ever.”
At the same time, the Carney government is deepening economic ties with China, a long-standing adversary of Japan.
Experts say Canada could struggle to simultaneously expand security partnerships with Indo-Pacific countries while also deepening ties with the world’s second largest economy.
“ The two-track strategy is a laudable goal,” said Jonathan Berkshire Miller, a geopolitical analyst and senior fellow at the MacDonald Laurier Institute whose work focuses on the Indo-Pacific.
“[It’s] harder to pull off in practice.”
Maintaining guardrails
In a major pivot from the Trudeau government’s approach to China, the Carney government has rapidly sought to deepen ties with Beijing.
In a state visit in January, Prime Minister Mark Carney reached a deal to allow up to 49,000 Chinese electric vehicles into Canada at reduced tariff rates in exchange for China reducing tariffs on Canadian agricultural exports.
At the same time, the government is seeking to build stronger security partnerships with countries in the Indo-Pacific.
“Our prosperity and security are closely tied to the Indo-Pacific, and the Government of Canada is strengthening its presence and engagement across the region to advance Canadian interests,” a Global Affairs Canada spokesperson told Canadian Affairs in an emailed statement.
Canadian defence officials say it is possible for Canada to pursue economic collaboration with China while maintaining security guardrails.
“As Prime Minister Carney stated, Canada can collaborate deeply with China on energy, climate change, and basic manufacturing, while maintaining guardrails about national security and economic security matters, including artificial intelligence, critical minerals, and defense,” a Department of National Defence spokesperson said.
But Berkshire Miller says that maintaining this separation is far from easy, especially since China’s economic and military strategies have become increasingly aligned in recent decades.
“China absolutely links those [strategies] for its own interests,” he said.
He points to a recent incident where Liberal MPs cut short their trip to Taiwan ahead of Carney’s visit to Beijing, reportedly on the advice of the Canadian government.
“All of a sudden, maybe we’re not vociferously engaging about Taiwan’s participation in multilateral fora,” he said. “No one’s saying anything about … tensions right now, whereas we may have said something six months ago.”
Building bonds
Vina Nadjibulla, vice president of research and strategy at the Asia Pacific Foundation of Canada think tank, also notes that forging deep defence relationships in the Indo-Pacific will take time.
“Because Canada historically had focused a lot more on the North Atlantic and the … relationship with the U.S., [the Indo-Pacific] needs special attention,” she said.
The Equipment and Technology Transfer Agreement is an early sign of that attention bearing fruit.
“The signing of the ETTA is a significant step in the bilateral Canada-Japan defence relationship,” the DND press release said.
For Berkshire Miller, the agreement sets an important precedent.
“The ETTA really should be a watershed agreement that allows us to start kicking the tires … [to see] what these partnerships could look like,” he said.
South Korea represents a parallel — and in some ways faster-moving — track. Canada’s first Indo-Pacific free trade agreement was signed with South Korea in 2014; the bilateral partnership has since expanded into defence, security and strategic coordination.
South Korea has fewer constitutional constraints on defence exports than Japan, making industrial collaboration easier, says Berkshire Miller. This has enabled Canada and South Korea to already have procurement discussions around submarines and other major defence capabilities.
With South Korea, “our relationship now is stronger than it’s ever been,” agrees Nadjibulla.
Looking south
Japan and South Korea may anchor Canada’s high-trust partnerships in Asia, but Ottawa’s Indo-Pacific strategy is expanding beyond them. Indonesia, India, Vietnam and the Philippines are growing in strategic importance.
These partnerships are “still in the building stage,” said Berkshire Miller, though progress is accelerating. He pointed to the Philippines as one of the fastest-moving defence relationships.
In November 2025, Canada and the Philippines signed a Status of Visiting Forces Agreement, which allows military personnel from both countries to operate and train within each other’s territories. That framework could enable expanded rotational presence and joint exercises.
The Canadian Armed Forces has also supported naval efforts in Philippine waters, including surveillance targeting illegal fishing and other illicit activity.
Taken together, the expanding network reflects Ottawa’s effort to ensure its Indo-Pacific pivot is not defined solely by China — or even by its closest Northeast Asian allies — but by a wider web of security and economic relationships.
From Nadjibulla’s perspective, walking that diplomatic tightrope is demanding but doable.
“As long as … the government’s narrative is clear, nuanced and sophisticated, and clearly outlines what it is that we’re trying to do with China and what will remain off limits, I think that would be understood in the region.
“ But for that, we do need to communicate as clearly as possible, and to engage in a lot of diplomacy with these other partners.”
