“The United States built the Panama Canal, and we made sure it was secure. Now, it’s time to take another look at the situation,” Trump said in his inauguration address
President Donald Trump has announced his intent to “take back” the Panama Canal, reviving a long-dormant strategic debate over U.S. influence in Central America and control of one of the world’s busiest shipping routes. He cited two primary concerns: Panama’s alleged violation of its neutrality pledge, established when the United States transferred the canal to Panama in 1999, and China’s growing influence over the waterway.
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“The United States built the Panama Canal, and we made sure it was secure. Now, it’s time to take another look at the situation,” Trump said in his inauguration address.
True that the 51-mile artificial canal was completed by the U.S. in 1914 after an abandoned French effort. It connects the Pacific and Atlantic Oceans, drastically reducing travel time for global shipping. The U.S. controlled the canal until the Torrijos–Carter Treaties gradually transferred authority to Panama, culminating in full Panamanian control in 1999.
Under the 1977 agreement, Panama pledged to maintain the canal’s neutrality and allow safe passage for all nations. The pact also stipulated that the U.S. and Panama would jointly protect the canal, though it explicitly barred unilateral U.S. intervention in Panama’s internal affairs.
But Trump has pointed to China’s expanding footprint at the zone, specifically its involvement in the management of key port facilities at the Panama canal’s entrances. Hong Kong-based CK Hutchison Holdings, which has operated the ports of Balboa and Cristobal at the canal for more than two decades, however, defended that it is publicly traded and not directly controlled by the Chinese government, but all Chinese firms are inevitably subject to the State oversight.
Panamanian President Jose Raul Mulino has also pushed back against Trump’s assertions, reaffirming that the canal remains under Panamanian sovereignty and said it has recently launched an audit into CK Hutchison’s operations to review its compliance with concession agreements. In turn, the company has defended its role, noting that it has paid hundreds of millions of dollars to the Panamanian government and that 99% of its employees are Panamanian.
Trump has also criticized Panama over canal toll rates, accusing the country of unfairly overcharging American ships, including U.S. Navy vessels. “American ships are being severely overcharged and not treated fairly in any way,” Trump said.
Panama, which has periodically increased canal passage fees, reasoned out water shortages, coupled with declining vessel traffic. However, it asserted that these hikes uniformly apply to all commercial ships but insisted that the U.S. military vessels continue to receive priority passage.
While Secretary of State Marco Rubio is set to visit Panama in the coming days, marking his first foreign trip since taking office, his talks will likely focus on canal tolls but cannot undermine broader regional security concerns, including migration through the perilous Darién Gap, a dangerous jungle route that many migrants traverse from South America to cross the U.S. border.
China’s Alternatives and Mexico’s Rail Corridor
While Trump seeks to confine his focus on Panama, China has already explored alternative routes to bolster its strategic reach in the region. In 2013, a little-known Chinese businessman, Wang Jing, secured a contract to develop a $50 billion, 173-mile interoceanic canal in Nicaragua. However, amid environmental protests and funding challenges, the project has stalled, with Wang indicating he no longer plans to travel to Nicaragua.
China, with its state firms investing heavily in the region’s energy, infrastructure, and space industries, has already surpassed the U.S. as South America’s largest trading partner. Beyond infrastructure, Beijing has expanded its military and diplomatic presence throughout the region, from the opening of a new megaport in Peru as part of its global Belt and Road Initiative (BRI) to roping in the largest Chinese diaspora communities culturally in Brazil, Cuba, Paraguay, Peru, and Venezuela among others.
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Meanwhile, Mexico has advanced its own alternative to the Panama Canal. The Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT), an upgraded rail corridor connecting the Pacific and Atlantic Oceans, opened for traffic in July 2024. The project, which predates the Panama Canal itself, offers a six-hour transit time and incentives for private investment, presenting a potential competitor to the canal in the years ahead.
As viable alternatives to the Panama Canal will take shape soon, whether the U.S. will take concrete steps toward reclaiming influence over the canal remains uncertain, but Trump’s remarks have already reignited a long-standing geopolitical debate over the growing influence of China in the region.