US President Donald Trump has recently declared
his intent to ‘take back’ the Panama Canal, accusing
China of exerting influence over the operations of
the canal and describing the handover of the canal
as ‘foolish’. As President-elect, he denoted the
crucial role of the Panama Canal for the economic
and national security of the United States. Shortly
thereafter, the US State Department issued a
statement, claiming Panama would no longer
charge fees for US government vessels- a claim
rebuked by the Panama Canal Authority. On 06
February 2025, US Secretary of State Marco Rubio
noted that Panama has laws to follow. However, he
maintained that it was absurd that the US had to pay
tolls that they were obligated to protect in a time of
conflict.
Panama’s President José Raúl Mulino Quintero
called on them to stop ‘lies and falsehoods’ about
the canal. However, Panama’s recent decision to
leave the Belt and Road Initiative, and their openness
to negotiate can be interpreted as a response to
Trump’s pressure. Panama has also announced an
audit into the subsidiaries of CK Hutchison Holdings,
the Hong Kong based companies that manage two
of the canal’s five ports. One of the world’s leading
container terminal operators, CK Hutchison
Holdings have managed ports at Balboa and
Cristóbal since 1997. Critics point to Beijing’s
increased control over Hong Kong in recent years,
ringing alarm bells over potential influence over the
canal. For their part, China has decried US ‘pressure
and coercion’.
The Key Global Gateway
The smooth operation of the Panama Canal is vital
for international maritime trade, as bypassing it
entails the perilous journey around Cape Horn at the
edge of South America. Connecting the Atlantic and
Pacific Oceans, the Panama Canal operates 24 hrs a
day year around. An estimated 1314,000 ships pass
through the Canal each year, connecting 180
maritime routes, 1920 ports across 170 countries.
The Canal is a vital source of revenue for the
government of Panama, reporting nearly 4.99 billion
PAB in revenue in 2024 and accounting for an
estimated 4% of national GDP. As a regional trade
hub, the canal also holds immense commercial and
strategic value, for both Panama and the global
network of maritime trade routes.
In the case of the United States for example, an
estimated 72% of transiting ships originate to or from
the US. In 2023, an estimated 40% of all US container
traffic travelled through the Panama Canal
representing some USD 270 billion in cargo. That
year, an estimated 5% of global maritime traffic
flowed through the canal, and an estimated 26% of
canal transit involves LPG carriers, which carry
different forms of energy in bulk. Over the past 26
years, the US has paid an estimated $25.4 million
dollars just for the transit of warships and
submarines.
A Condensed History of the US and the Panama
Canal
The United States has a colourful history of
intervening in Latin America. In Panama’s case, its
origins lie with the canal and US intervention. In
1903, the US intervened against Colombia,
guaranteeing the independence of Panama, in order
to construct and control the proposed canal,
thereafter owning and operating the Panama Canal
until 1977.
In 1977, two treaties renegotiated this relationship.
The Neutrality Treaty authorises the United States
military to defend the neutrality of the Panama Canal;
in effect, guaranteeing perpetual maritime access.
The most recent month-long invasion of Panama
(Dec 1989Jan 1990) toppled dictator and one-time
US ally, Manuel Antonio Noriega, although he never
‘formally’ served as President of Panama. President
George H.W. Bush justified ‘Operation Just Cause’ in
part on protecting the Panama Canal Treaty (1977).
The latter treaty transferred control over the Panama
Canal to the Panamanians on 31 December 1999.
The Torrijos-Carter Treaties allowed the US some
leeway against charges of imperialism by
Soviet-aligned states in the Cold War. Trump’s
declarations could be a mechanism to gain further
concessions from Panama, including US investment
into the canal. The government of Panama’s actions
all appear to consider the provisions of the treaties
and the historic role of the United States in
Panamanian affairs.
A Looming Shadow on Global Maritime Trade
Trump’s assertions over the Panama Canal comes at
a time where maritime trade suffers from spillover
effects from the Russo-Ukrainian War and the wars in
the Middle East. At one point, the Red Sea crisis
caused a reported 40% revenue drop for the Suez
Canal. Suffice to say, any military action by the US
against Panama would have a spillover impact on
global maritime trade and pose a severe blow to the
Panamanian economy.
