As the trade war between the world’s two largest economies escalates, Canada remains caught in the crossfire, according to a Nobel Prize-winning economist.

Michael Spence, professor at New York University’s Stern School of Business said that global trade tensions continue to pose risks for the Canadian economy.

“Canada is reasonably well-positioned economically, but it’s not invulnerable to slowdowns,” Spence told BNN Bloomberg’s Jon Erlichman and Amber Kanwar on Monday.  

Last December, Canada arrested Huawei Technologies Co. CFO Meng Wanzhou in Vancouver following an extradition request from the United States. Following the arrest, China  revoked canola seed import licenses of two Canadian exporters and detained two Canadians in what are considered to be retaliatory moves.

“There are two Canadians in jail in China, and Canada in those dimensions is caught right in the middle of this rising set of tensions between the U.S. and China. It’s a very tough position to be in,” Spence said.

Still, Spence added that while the Canadian economy faces some risks in the ongoing U.S.-China trade dispute, there are still reasons for optimism as U.S.-Canadian trade relations improve.

“The slowdown in America (that is directly related to trade) is likely to be much less than the pressure on China. And Canada is very closely connected to the U.S. economy. I wouldn’t call that a mega risk from a Canadian point of view,” said Spence.