Canadian business faces rising risks as trade tensions between China and the United States escalate to a potential trade war, according to Howard Balloch, Canada’s former ambassador to China.

“When two elephants clash on the field it’s tough to be a smaller animal out there, and we are a smaller animal,” he told BNN in a broadcast interview Friday. “It doesn’t benefit anybody. There are real risks there,” Balloch said. 

U.S. President Donald Trump announced on Thursday plans to impose tariffs on at least US$50 billion worth of Chinese goods for what his administration says is misappropriation of U.S. intellectual property. 

China showed readiness to retaliate by declaring plans to levy additional duties on up to US$3 billion of U.S. imports including pork, fruit and wine in response to U.S. import tariffs on steel and aluminum, which were due to go into effect on Friday.

Canada needs to step lightly to ensure it does not get dragged into the clash, warned Balloch, who served as Canada’s ambassador to China between 1996 and 2001.

“If Canadian pork producers or Canadian oilseed producers end up filling a gap left by the tariffs that the Chinese put on American producers that could also create a backlash in the United States – and those are dangers,” he said. 

Imposing tariffs on China is dangerous, but the issue of Chinese mistreatment of foreign companies is real, said Balloch.

“The focus that the American business community seems to have been able to bring the White House and the administration towards is a focus on being treated fairly and doing business in China and that’s not just a concern for American business, it’s been a concern for businesses around the world -- including Canadian businesses,” he said.

However, Balloch argues Trump’s strategy of negotiating with China in public is high risk and could easily backfire.

“Negotiations that are carried out in the headlines and publicly will be met with clear Chinese retaliation,” he said.  “Negotiating with China is always done best quietly.”

Trump’s tariff announcement weighed on global financial markets as investors worried the dispute could spiral into a damaging round of retaliatory import controls by governments around the world. However, there is still time to avert a full-scale trade war between the two economic giants, according to Balloch.

“This could easily get out of hand – but, so far, it has not gotten out of hand,” he said. “If everyone decides they have to stand very tall and thump their chest and show that they are going to put in tariffs equivalent or bigger than the last guy then it really is a bad thing.”