Trade experts say Canada's customs enforcement on forced labour has historically been less rigorous than America's, making it an attractive alternative route. "If you're a company trying to get Xinjiang products into North America, routing them through Canada first is an obvious strategy," said Sarah Teich, a human rights lawyer who has worked on forced labour cases.

China denies the forced labour allegations, calling them "lies" meant to damage its reputation. The Chinese Embassy in Ottawa issued a statement Friday condemning what it called "politically motivated attacks" on legitimate Chinese businesses.

For Carney, the crisis represents his first major foreign policy test. During the campaign, he promised a "pragmatic" approach to China that would protect Canadian interests while standing firm on values. Now he must demonstrate what that means in practice—and early signs suggest Ottawa is prioritizing quiet diplomacy over public confrontation.

The Prime Minister's Office declined interview requests but said in a statement that Canada "takes its obligations on forced labour seriously" and is "reviewing its enforcement mechanisms." That carefully worded response satisfied no one: too weak for human rights advocates, too cautious for business groups hoping for clearer guidance.

The political stakes extend beyond foreign policy. Immigration and exploitation of foreign workers—including international students—became defining issues in the recent election. Canadians who voted for change partly because of concerns about Canada's international reputation now want to see whether Carney's government will act differently than its predecessor.

Provincial reactions have been muted, with premiers largely deferring to federal jurisdiction on trade policy. But business groups are watching nervously. The Canadian Chamber of Commerce warned that "uncertainty around enforcement creates challenges for Canadian companies trying to ensure ethical supply chains."

The U.S. investigation is expected to take several months. In the meantime, Carney faces a choice: strengthen Canada's forced labour enforcement before Washington forces his hand, or wait and see—risking both American pressure and accusations that his China reset comes at the expense of human rights principles.

It's a test of whether Canada can maintain its distinct foreign policy while navigating the reality of sitting between two rival powers. The next few months will show whether Carney's pragmatic approach can square that circle—or whether geography and geopolitics will force harder choices than campaign promises suggested.