Middle power prisoners: The limits and opportunities of an Australia-Canada middle power alignment

As leaders gather for the 2025 G7 Summit in Kananaskis, Alberta, the post-World War 2 international order continues to unravel with revisionist powers, including China, Russia and the US, deepening their strategic competition. Amid this evolving geopolitical landscape, middle powers like Australia and Canada find themselves increasingly alone in navigating between competing great powers. Unfortunately, the theoretical promise of middle power alignment—enhanced autonomy through collective action—appears elusive in practice when confronted with the structural realities of international politics, especially the widening power gap between the US and China and everyone else. 

The concept of middle power diplomacy has traditionally celebrated these states’ ability to build coalitions, advance multilateralism, and shape norms despite their power constraints. Australia and Canada, alongside peers like Japan, South Korea, and various European states, have long been touted as exemplars of this approach. Yet their responses to Trump’s tariffs and his transactional diplomacy demonstrate that when confronted with direct pressure from their primary security guarantor—the US—middle powers default to bilateral preservation rather than multilateral or minilateral resistance.

This pattern reveals a classic prisoner’s dilemma dynamic where collective action would maximise aggregate benefits, but individualised cooperation with the more powerful actor becomes the dominant strategy. While these dynamics appear in multiple contexts, they have been particularly evident in two contrasting cases: responses to Trump administration tariffs versus reactions to Chinese economic coercion. 

For longstanding allies and partners of the US, resistance is futile in contesting pressure that comes from Washington whereas Beijing’s coercive tactics leave more maneuvering room for collective resistance. 

The Renewed Tariff Regime and the Middle Power Dilemma

Within weeks of his inauguration, Trump initiated a sweeping tariff program that exceeded even his first administration’s measures. The new regime imposed 25% tariffs on Canadian aluminum and lumber, 20% on Australian agricultural exports, 30% on Japanese automobiles, and comparable levies on European goods. The stated justification—protecting American jobs and addressing trade imbalances—mirrors previous rhetoric, but the implementation has been more systematic and comprehensive.

These actions presented middle powers with a classic prisoner’s dilemma. Collectively, they possess significant economic leverage—together accounting for roughly 40% of American export markets. Coordinated countermeasures could, theoretically, impose sufficient costs to alter American calculations. Yet each individual middle power remains vulnerable to targeted pressure and dependent on American markets, security guarantees, and diplomatic support across multiple domains.

The prisoner’s dilemma manifests precisely in this tension: the optimal collective outcome would be coordinated resistance forcing a more favorable equilibrium, but the rational individual strategy remains bilateral accommodation to secure exemptions and minimise disruption to critical economic relationships.

The Fragmentation of Middle Power Solidarity

Middle power responses to trade tensions have historically balanced principles with pragmatism, especially when it comes to the US. When China imposed tariffs on Australian wine in November 2020, leaders from various countries expressed general support for rules-based trade. Then Prime Minister Morrison emphasised the importance of WTO principles, while Canadian officials reiterated their commitment to multilateral trade frameworks. Japanese and European representatives similarly made public statements supporting trade according to established international rules. However, these diplomatic expressions rarely translated into coordinated economic interventions. Instead, affected nations typically pursued individual strategies to address trade disruptions, working through existing diplomatic and economic channels while carefully managing their respective relationships with China.

As in the past, when faced with Trump’s tariffs, nations prioritised bilateral solutions over collective resistance. Australia negotiated for certain exemptions while separately increasing defence cooperation with the US. Canada reached compromises on steel and aluminum tariffs through sector-specific negotiations. Japan discussed automotive exports and energy purchases as part of ongoing trade talks, though these remained separate from broader tariff discussions. Each country ultimately pursued pragmatic bilateral arrangements that addressed their specific economic vulnerabilities, demonstrating how national interests typically override aspirations for coordinated responses to trade challenges.

The outcome reveals a fundamental truth: when confronted with direct pressure from their security guarantor and largest economic partner, middle powers calculate that bilateral accommodation delivers more certain benefits than the risky prospect of multilateral resistance. The prisoner’s dilemma plays out exactly as game theory predicts—actors with incomplete information about others’ resolve default to the suboptimal but safer individual strategy.

This pattern becomes even more striking when contrasted with middle power responses to Chinese economic coercion. Since 2020, China has deployed punitive economic measures against Australia (wine, barley, coal), Canada (canola, pork), Lithuania (comprehensive import restrictions), South Korea (tourism and cultural restrictions), and others. In these instances, middle powers demonstrated remarkable solidarity.

While China imposed significant tariffs on Australian wine in November 2020, the international response was more nuanced than a coordinated intervention. Some diplomatic expressions of concern emerged from partners like Japan and the US regarding China’s trade practices, but these rarely translated into formal economic support mechanisms. Middle power responses generally remained individualised and cautious, reflecting the complex balance each nation maintains between economic interests with China and security partnerships with allies. Countries like Canada, Japan, and South Korea expressed diplomatic support for rules-based trade while carefully managing their own economic relationships with Beijing. 

Why such divergent responses? The answer lies not in the nature of the coercion but in its source. Resistance to Chinese pressure aligns with American strategic preferences and receives explicit American backing, even under a Trump 2.0 administration. The US has actively encouraged such solidarity, reduced its costs through market access, and provided diplomatic reinforcement. No comparable backstop exists for resistance to American pressure—indeed, the structural incentives run precisely opposite.

The Australia-Canada Relationship: Test Case for Middle Power Limitations

The Australia-Canada relationship illustrates important dynamics in middle power diplomacy. These nations share notable similarities—resource-rich developed economies with British Commonwealth heritage, democratic systems, and security relationships with the United States while maintaining significant economic ties to China.

Both countries engage through various bilateral mechanisms, including regular ministerial consultations, diplomatic exchanges, and economic dialogues. Their official communications consistently emphasise shared values and interests in maintaining an international order based on rule-of-law.

However, when confronted with trade challenges, practical limitations emerge. Historical patterns suggest both nations typically prioritise their individual bilateral relationships with major powers. These patterns highlight a persistent tension in middle power diplomacy—balancing aspirational rhetoric about cooperation against the pragmatic pursuit of national economic interests. This dynamic continues to shape how countries like Australia and Canada navigate relationships with both the United States and China in today's complex geopolitical environment.

This pattern reflects structural realities rather than lack of commitment to middle power principles. For both Australia and Canada, the US remains their primary security guarantor, largest investment partner, and critical export market. The asymmetry in these relationships creates what international relations scholars call “asymmetric interdependence”—a condition where the costs of disruption are distributed unequally.

When middle powers contemplate resistance to American pressure, they must weigh not only immediate economic costs but potential spillover into security cooperation, intelligence sharing, and diplomatic support on other priorities. This comprehensive interdependence creates powerful incentives for accommodation even when specific measures like tariffs impose significant costs.

The prisoner’s dilemma proves particularly apt because the challenge isn’t one of values or preferences but of strategic calculation under conditions of uncertainty based on national interests. Middle powers genuinely desire more balanced economic relationships but cannot credibly commit to mutual resistance when the risks of isolation are so high and the benefits of first-mover advantage so compelling.

Does this structural reality condemn middle power diplomacy to irrelevance? Not necessarily, but it requires recalibrating expectations and strategies. Rather than pursuing direct resistance to US pressure, middle powers might better employ their limited leverage toward shaping specific policy domains where their collective expertise creates unique value.

For Australia and Canada specifically, their comparative advantages in resource governance, Arctic security, role in NATO (Canada), and regional diplomacy offer pathways to influence that don’t directly challenge US structural power but add value to both the US and themselves. Their emerging coordination on critical minerals—highlighted in pre-summit communications—demonstrates how middle powers can shape standards within parameters acceptable to great powers such as the US rather than attempting to redraw those parameters entirely. 

As the Kananaskis Summit concludes, public declarations will inevitably emphasise solidarity and shared commitment to rules-based order. Yet beneath this diplomatic veneer lies the persistent reality of the prisoner’s dilemma that constrains middle power agency and the reality that today’s international order is not only being attacked by China and Russia but also the US.

This reality doesn’t negate the value of middle power diplomacy but defines its boundaries. The effectiveness of the Australia-Canada relationship—and middle power diplomacy more broadly—will depend on developing sophisticated strategies that maximise influence within these structural constraints while preserving spaces for incremental reform. In the complex landscape of great power competition, middle powers must recognise both the possibilities and limitations of their collective agency. The limits of Australia-Canada alignment serve as a microcosm of broader middle power constraints in an era of renewed great power competition. In the middle power prison, success means not escaping the cell but making it more habitable while preserving pathways to incremental reform.

Dr. Stephen Nagy is Professor of Politics and International Studies at the International Christian University and a visiting fellow and the Japan Institute for International Affairs specialising in Indo-Pacific geopolitics and great power competition.