It can be both ways. Mercari penalizes you for canceling orders. So, since that seller was the one who sent the buyer the cancellation request, Mercari slapped her feedback page with a "this seller canceled" message. Same will apply to the buyer if it was done the other way around.
And since that seller canceled one too many times, Mercari left that "this seller has x% cancellation rate" on their closet to warn potential buyers. You can still order from her, but be warned of a potential cancellation. It is probably not worth it.
If I had noticed that message sooner, I would not have posted that listing. Sorry.