Political deadlock over Panama Canal's control

US President Donald Trump has repeatedly voiced his desire to regain control of the Panama Canal, a strategic waterway that the United States previously owned and operated before transferring full ownership to Panama in 1999. Trump has repeatedly warned of China's increasing grip of the canal operations. A look back into the history of the 82 kilometers short route offers insights into why global powerhouses are willing to clash over it. 

The Panama Canal is the main link between the Atlantic and Pacific Oceans and enables vessels to bypass the lengthy and costly trip around South America. It is of undisputed crucial importance for global maritime trade as it handles around 5–6% of global trade. Besides being a central point for international commerce, an article by the Council of Foreign Relations points to it's extreme vitality to US supply chains. Shipping between the Eastern Coast of the US to the West, home to the power centers of the American economy, goes mainly through the canal. The United States is its largest user, with approximately 40% of all American container traffic passing through the canal each year. 

The canal’s construction was first attempted by the French in the 1880s under Ferdinand de Lesseps, a diplomat who had successfully overseen the Suez Canal project. However, high mortality rates among workers caused by tropical diseases and financial mismanagement caused the French effort to collapse a mere 9 years into the project. The US later took over, completing the canal in 1914. It remained under American control until President Jimmy Carter negotiated the Torrijos-Carter Treaties in 1977, which gradually transferred authority to Panama by the end of 1999. 

Today, the Panama Canal Authority (ACP), an autonomous Panamanian agency, oversees its operations. Carter's decision was driven by Panama City’s growing demands for sovereignty and the president's desire for better relations with Latin America. The new US president has repeatedly critiqued this decision as a terrible mistake, arguing that the loss of the Panama canal has opened the US to security and political threats. 

Furthermore, Trump has accused Panama of charging excessive transit fees for US ships after a severe drought forced authorities to impose transit restrictions in 2023. He also suggested that China secretly runs the canal, even stating he would consider using military force to reclaim control. His rhetoric aligns with a broader US strategy to counter Chinese economic influence in Latin America. Analysts told the publication that Trump’s focus on Panama serves as a warning to other regional leaders about deepening ties with Beijing. Secretary of State Marco Rubio, a loud opponent of authoritarian leaders in Latin America which often enjoy good relations with China, has also raised alarms, arguing that China could turn the canal into a "choke point" in a geopolitical crisis, threatening US national security. 

This perspective stems from China’s broader strategy in South America, where it has surpassed the United States to become the largest trading partner for South America and a key investor in energy, infrastructure, and space industries. Trade between China and Latin America has surged from less than 2% of the region’s exports in 2000 to over $450 billion by 2021, with projections to exceed $700 billion by 2035. Beijing has significantly expanded its commercial and diplomatic footprint in Latin America, investing heavily in infrastructure and trade. 

While there is no robust evidence that points to the Chinese government controlling the canal, a Hong Kong-based conglomerate has been actively involved in it's operations. A subsidiary of CK Hutchison Holdings  and one of the world’s leading container terminal operators, has managed two ports—at Balboa on the Pacific coast and at Cristóbal on the Atlantic coast—since 1997. Some experts say this raises concerns about potential Chinese influence over the ports, as Beijing’s national security laws extend to Hong Kong as of recently.

China’s Belt and Road Initiative (BRI), which focuses on infrastructure development and trade partnerships, has attracted 22 Latin American and Caribbean nations, including Panama. Beijing has also used economic ties to diplomatically isolate Taiwan. As China refuses to continue diplomatic relations with countries that recognize the island's sovereignty, it managed to persuade several Latin American countries to sever ties with the island. Currently, only a handful of Latin American nations recognize Taiwan after several have shifted gears regarding their relations to the island.

Panama’s President José Raúl Mulino firmly rejected Trump’s comments, stating there is no possibility of renegotiating canal ownership. He also denied Chinese involvement in its management and emphasized that shipping fees apply equally to all vessels. While Panama welcomes Chinese investment, its government insists on maintaining sovereignty over the canal, which contributes about 4% to the country’s GDP.

By Nazrin Sadigova