On January 20, 2026, Canadian Prime Minister Mark Carney delivered a 16-minute speech at the World Economic Forum in Davos, Switzerland. In his speech, he sharply criticized the current rules-based international order, calling it a “lie,” founded not on mutual benefit, but rather on power imbalances and economic exploitation by Great Powers.
Although U.S. President Donald Trump was not mentioned explicitly, it was clear that his tariff campaign was a central reference point. Carney’s speech vaguely referenced this, saying that Great Powers have increasingly used economic leverage as a weapon. In response, he called on middle power countries such as Australia and India to stop vying for the favour of the Greats and instead come together to form a middle power web of economic and security interconnectedness.
To achieve this vision, Carney proposed “values-based realism,” a Canadian “Third Path” built on “variable geometry”: characterized by forming alliances with different countries on specific issues based on shared interests rather than ideological alignment. As Carney states, members of these alliances do not need to agree on everything, but merely agree on the topic at hand. By avoiding rigid ideological blocs, Canada will diversify its relationships abroad and reduce overreliance on any single partner.
The speech was reportedly well received by most attendees, though American representatives dismissed it as “complaining.”
The speech presents an ambitious and potentially promising path, but how feasible is it in practice? What practical steps must follow, and have they already begun?
Even before the speech, Canada was forced to begin reducing its economic dependence on the United States in response to American tariffs. However, this economic relationship is not easily undone, largely because of the sheer scale of Canada’s export reliance on the U.S. market. In 2024, 77% of all Canadian exports went to the United States, accounting for 17.8% of Canada’s GDP. Although retaliatory tariffs and shifting trade patterns caused that figure to fall in 2025, the change was modest: almost 72% of Canadian exports still went south of the border. To meaningfully reduce the kind of economic leverage Carney described, that percentage would likely need to decline significantly. As long as the American market accounts for more than half of Canadian exports, substantial leverage remains.
In an effort to diversify trade relations, Carney has expanded outreach to other major economies, notably China. In January, he became the first Canadian prime minister to visit China since 2017. During that visit, the two countries negotiated cooperation in energy, clean technology, and climate competitiveness. Canada agreed to import 49,000 Chinese electric vehicles under the most-favored-nation tariff, while China is expected to lower tariffs on Canadian canola seed. The government has framed this as a diversification effort, aiming to increase exports to China by 50% by 2030, despite China historically accounting for less than 5% of Canadian exports.
However, this approach naturally risks transferring dependence from one Great Power to another. Additional diversification efforts were initiated with Carney’s visits to India, Australia, and Japan at the beginning of March, where he began negotiating what officials have described as “ambitious” trade agendas. In 2024, these three countries combined accounted for just under 3% of Canada’s exports. The success of these negotiations will therefore be crucial in determining whether diversification can meaningfully shift Canada’s trade balance.
Beyond trade, national defence represents another critical dimension of Carney’s strategy. Canada has historically maintained an underfunded military. Despite its membership in NATO, it has consistently fallen short of the alliance’s 2% of GDP defence spending guideline, investing roughly 1.45% of GDP instead. However, Canada has joined the European SAFE agreement, enabling increased defence investment. In a recent statement on February 17, Carney indicated that Canada is on track to meet the 2% target “by spring,” adding that recruitment to the Canadian Armed Forces has risen 13% since June. Most significantly, the government has pledged $180 billion annually toward “domestic resilience.” While such efforts will take years to fully materialize, they suggest a shift toward strengthening internal capacity.
Carney’s call for other middle powers to follow this “Third Path” raises further questions. Canada has been uniquely compelled toward diversification by Trump’s tariffs and its unusually high level of export concentration. Other middle powers, including India, Japan, and Australia, are not nearly as dependent on a single partner. Australia, for instance, has the least evenly distributed export portfolio among them, yet its largest export market, China, accounts for only 33% of its exports. The incentive for these countries to adopt Canada’s strategy may therefore be weaker.
Whether Carney’s Third Path represents a durable shift in middle power strategy, or a response to uniquely Canadian pressures, remains to be seen.
This article was first published as part of the Sundial Press printed edition in Spring 2026
Photo Credits: Politico
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