The keenest observer of the all-out trade war between the United States and Canada is surely President Xi Jinping of China. If Washington doesn’t change course, he’s probably going to be its winner, too.

Mr. Xi already has monopoly power over components that are vital to hundreds of thousands of American and Canadian jobs. His April 2025 restrictions on rare-earth magnets temporarily shut down a Ford Explorer plant in Chicago. In Ontario later that year, Honda briefly reduced and suspended production of Civics and CR-Vs after he closed off access to semiconductors, which disrupted parts supply.

These sorts of attacks and those sorts of vulnerabilities should bring allies together. In a normal world, Washington and Ottawa would be laser focused on how much and how quickly they could manufacture together to prevent that kind of Chinese economic coercion.

Instead, President Trump has framed his tussle with Canada as a fight over how much manufacturing the country should be prepared to yield to the United States. And Mr. Trump wants almost all of it.

Prime Minister Mark Carney of Canada walked away from Mr. Trump’s latest offer and then escalated with fresh tariffs. Former Deputy Prime Minister Chrystia Freeland was correct to say it was even “a bad deal for the United States.”

Mr. Trump cannot allow Canada to abandon the negotiations. Like it or not, Washington needs a resilient Canadian manufacturing sector working in concert with America’s companies in the much bigger and more consequential battle against Chinese market dominance.

Ottawa rebuffed Mr. Trump’s latest offer in part because it retained too many of his import tariffs on Canadian cars, heavy trucks, steel and aluminum. With tariffs that high, Americans will eventually stop buying Canadian-assembled vehicles, and Detroit will rework its supply chains to exclude Canadian parts. Cars and parts once moved seamlessly across the U.S.-Canada border between suppliers and buyers, much as they did over the U.S.-Mexico border.

Being shut out of the market next door will devastate the Canadian auto industry. Canada is not close enough to Asia or Europe to survive as part of their supply chains.

We know what will probably happen next based on what took place in Australia after its automakers disappeared. By 2017, Toyota, General Motors and Ford closed their last Australian plants and caved to economic reality: The Australian market was too small and too remote to support the scale needed for globally competitive manufacturing.

Australians at first imported cars from manufacturing hubs across Japan, Korea, Thailand, Europe and the United States. Less than 10 years later, Australia looks very different. Nearly one in three new cars bought in Australia in the first half of 2026 was made in China, up from less than one in 250 back in 2017. (Only one in 50 Australian purchases in the first five months of 2026 was made in the United States.)

Mr. Trump should expect Canadian consumers to go the same route. In January, Mr. Carney announced Canada would allow 49,000 Chinese electric vehicles to be sold in the country — less than 3 percent of new car sales — and would slowly increase that number. Any decision to further open the Canadian market would probably lead to a Chinese import surge.

Why is pure Econ 101. Buying higher-cost cars from the United States is easier to justify politically when there are offsetting benefits to the national economy, such as assembly jobs, profits to domestic parts suppliers and communities built around steel or aluminum plants. If local manufacturing disappears, so will the reasons for Canadians to accept paying higher prices.

Losing Canadian customers to China would be terrible for America for two reasons.

First, the total number of buyers matters for sectors such as automobiles, which have high fixed costs and substantial barriers to new entrants. Having more consumers means companies can learn how to lower costs and offer reduced prices to get even more customers. Losing Canadian car buyers will be one more step toward ceding the global automotive industry to China.

Today, Chinese companies sell low-priced cars. Tomorrow, the country could weaponize its newfound monopoly power. China also once offered the world great deals on rare-earth magnets and low-end semiconductors. Those prices allowed it to accumulate the market dominance that ultimately gave Mr. Xi the capacity to cut off Ford, Honda and many others last year.

China has increasing market shares in sectors such as steel, aluminum, shipbuilding and telecommunications equipment. A recent O.E.C.D. report suggested that 60 percent of China’s global market share gains since 2005 could be attributed to its policy of supporting industries with generous subsidies.

Second, losing the Canadian commercial base could turn away, once and for all, one of Washington’s few remaining economic security allies. Before Mr. Trump started whacking Canada with tariffs in 2025, Ottawa matched many of Washington’s duties on Chinese electric vehicles, steel and aluminum. He has forced Canadians to ponder separating from America instead of working with America to separate from China.

To fight the real trade war with China, Canadian consumers must continue to choose North American products, even though the Chinese versions are less expensive. Washington needs Canadians to accept today’s costs of a manufacturing sector integrated with the United States’.

Mr. Trump, for his part, will have to moderate his “made in America” demands. He can’t kill off Canadian manufacturing and hope to retain access to the Canadian consumer.

To tackle the China challenge, the West requires more manufacturing clout than even an integrated North American economy can offer. Washington needs to rally all potential allies in the collective fight against China’s market dominance, and they are waiting to see whether Mr. Trump finds an offramp from his wrongheaded trade war before it is too late.