Canadian Prime Minister Mark Carney’s “rupture” speech at the World Economic Forum ( WEF ) in Davos, Switzerland, on January 20 has triggered a significant reaction across Asian financial centres as investors weigh the possible emergence of a new “Middle Power” trade bloc, as per the “Carney Doctrine” floated in his WEF speech, against the threat of a full-scale trade war with the United States.

While North American markets sputtered on fears of diplomatic “subordination”, Asian markets showed a sharp divergence, reflecting both opportunity and unease.

The most striking reaction came from China, where Hong Kong’s South China Morning Post and the mainland’s Global Times heralded Carney’s speech as a realistic acknowledgment of US decline.

Chinese mainland markets remained remarkably stable, with the Shanghai Composite adding 0.16%. Analysts suggest Beijing views the recent Canada-China strategic partnership, which traded electric vehicle tariff relief for Canadian agricultural access, as a template for other middle powers seeking “strategic autonomy” from Washington.

Conversely, India’s Sensex plunged over 1,000 points in the wake of the speech. While Indian commentators noted that Carney’s vision of a multipolar world mirrors New Delhi’s own long-standing preferences, the immediate capital outflows were driven by broader global trade anxieties.

Despite the market dip, The Times of India reported optimism that Carney’s rhetoric will accelerate the long-delayed Canada-India Free Trade Agreement.

Across the region, the initial “rupture” shock on January 20 led to a sharp “risk-off” move. In Japan, the Nikkei fell 280 points ( 0.53% ) as 30-year government bond yields surged, threatening to unwind popular carry trades.

However, a tentative recovery began on January 21, driven by what Wall Street has termed the “Taco trade” ( Trump Always Chickens Out ). Investors across Asia began “buying the dip” on the bet that US threats of Greenland tariffs are a negotiating tactic rather than a permanent policy shift.

For Asian commodity traders, the “Carney Doctrine” has been a boon for specific sectors.

In agriculture, ICE Canola futures jumped C$17 ( US$12.29 ) following the Canada-China deal, with 60,000 tonnes of Canadian product immediately cleared for delivery to China.

Energy markets are pricing in increased Canadian energy exports to Asia, particularly through the TransMountain pipeline, as Canada seeks to double its non-US exports by 2035.

While the short-term market consensus views Carney’s speech as a “strategic opening gambit”, the Internatonal Monetary Fund has warned that a “spiral of escalation” remains the single largest threat to global growth.

As the WEF continues in Davos, Asian investors remain focused on whether this “Middle Power” coalition, including the EU, India and Asean ( the Association of Southeast Asian Nations ), can truly weaponize their collective economic weight to counter US pressure.