Chethana Janith, Jadetimes Staff
C. Janith is a Jadetimes news reporter covering science and geopolitics.
In the second half of December 2024, US President-elect Donald Trump provoked a diplomatic scandal involving several Latin American nations over the potential return of the Panama Canal under Washington’s control.
Trump Against Tariffs
Trump accused the Canal’s management of allegedly charging excessive fees for the passage of American vessels. Furthermore, he claimed that the Canal’s infrastructure was being exploited by the Chinese military, which prompted a response from Beijing.
Panamanian President José Raúl Mulino publicly addressed Trump’s remarks, assuring that “every square metre of the Canal and its adjacent zones belongs to Panama”. Additionally, Mulino had to refute reports of Chinese soldiers being present in the Canal zone. Citizens and several social organisations in Panama also reacted negatively to Trump’s statements, organising a protest near the US Embassy in Panama City.
It is worth noting that Trump could not have been unaware that his comments would provoke an entirely unnecessary reaction from Panamanian authorities, for whom sovereignty over the Canal is an extremely sensitive issue. This sensitivity also extends to several Latin American nations, particularly given the increasing influence of China in the region. Moreover, Panama is a key transit country for the main flow of migrants from South America. For this reason, the US needs to foster friendly relations with Panama to counter the influx of illegal migrants.
Mulino firmly rejected any possibility of lowering tariffs for vessel passage, as he argued there was no need to do so. Since January 2023, the Panama Canal Authority (PCA) had already reduced the number of tariffs from 430 to 60. A fixed transit fee, dependent on the lock used and vessel type, was also introduced. However, fees for transit reservations were increased. As of January 2025, these fees rose from $41,000 to $50,000 for Panamax-class vessels, including medium-range tankers. For Neopanamax-class vessels, fees increased from $80,000 to $100,000. In 2024, the average transit fee for a medium-range tanker through the Panama Canal was approximately $280,000, while for a Very Large Gas Carrier (VLGC), this figure exceeded $505,000. By comparison, transit fees during the same period through the Suez Canal were $274,000 and over $487,000, respectively. This means that passage through the Panama Canal is more expensive, although transit costs have risen for both canals. However, while the Suez Canal’s fee increase is attributed to heightened risks from the escalating Israeli-Palestinian conflict, the rise in Panama’s fees is linked to the historic drought of 2023–2024. Yet, the American president entirely disregards this context.
Trump has also attempted to appeal to PCA data showing that in the 2024 fiscal year, vessels bound for the US accounted for approximately 75% of Canal traffic (40% of all US container shipments), while vessels from China made up 22%, Japan 14%, and South Korea 9%. However, Trump ignores the fact that the vessels transporting goods are not American but predominantly belong to shipping companies such as China’s COSCO Shipping, Denmark’s Maersk, France’s CMA CGM, Switzerland’s MSC, and Israel’s Zim, which are the ones paying for transit.
Trump has further manipulated facts by claiming that Panama charges “exorbitant fees” for the passage of American military ships. However, the PCA rightly points out that the fee paid by any country’s military ships, including those of the US, is calculated based on maximum displacement tonnage. Additionally, military fleets are entitled to expedited transit under the 1977 Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal. Therefore, there is no discrimination as alleged by Trump.
China’s Influence
Trump is expected to continue pressuring Panamanian authorities. To this end, the American president appointed Kevin Mario Cabrera as the new US ambassador to Panama. Cabrera, of Cuban descent, is a professional lobbyist and Miami-Dade County commissioner (Florida). He is yet another representative of the Florida political clan. As a staunch anti-communist, Cabrera opposes the current governments of Cuba, Venezuela, and Nicaragua. Reports suggest that Cabrera’s primary task will be to negotiate lower transit tariffs and counter Beijing’s influence in Panama.
Trump’s team, relying on information from the US Southern Command, believes that the Panama Canal is already partially controlled by China. This assumption is based on the fact that Panama Ports Company, a subsidiary of the Hong Kong-based Chinese conglomerate CK Hutchison Holdings Limited, manages the Pacific port of Balboa and the Atlantic port of Cristobal at the canal’s entry points. Additionally, the vice-president of COSCO, a major Chinese shipping company, is a member of the Panama Canal Advisory Board, giving Beijing a certain level of access to decisions concerning the canal’s operations.
At the same time, the US Southern Command notes that since Panama joined the
“Belt and Road Initiative” in 2018, there has been a significant increase in Chinese-funded infrastructure projects. One of the largest is the construction of a fourth cable-stayed bridge over the Panama Canal, spanning 6.5 km, by China Communications Construction Company Ltd. and China Harbour Engineering Company Ltd., at a cost of over $1.4 billion. Furthermore, these companies, together with China Railway Group, are evaluating a $4 billion project to construct a 450-km railway connecting the cities of Panama and David in the province of Chiriquí. It is also notable that Trump’s discussions about potentially bringing the Panama Canal back under US control came shortly after Nicaraguan President Daniel Ortega proposed reviving the project to build an alternative canal through Nicaragua at the 17th China-Latin America Business Summit in November 2024.
Clearly, this growing Chinese presence around the Panama Canal has triggered a negative reaction in Washington. For the new administration, it will undoubtedly remain a top priority.
What Next?
Overall, Trump’s statements about reclaiming the canal run up against the existing legal framework. The transfer of the Panama Canal was formalised under the Torrijos-Carter Treaties of 1977, which include the “Neutrality Treaty” and the “Panama Canal Treaty”. These agreements stipulated the canal’s transfer to Panama on 31st December 1999 and enshrined the protection of Panamanian sovereignty. The bilateral treaty is binding and cannot be annulled; only a new agreement between Panama and the United States could supersede it. Legally, the US has no avenue to regain control of the canal. However, it does retain the right to establish military control under Article 4 of the Panama Canal Treaty, allowing for the canal’s defence in the event of a threat. Such actions, however, are highly unlikely and would be extremely damaging to the US’s regional and international reputation.
The most probable course of action is for Washington to exert pressure on Panamanian authorities to lower transit tariffs. The US has leverage in this regard, as Panama’s banking system is entirely dependent on American financial institutions. Additionally, revenue from canal tariffs also flows through US banks. Should Panama relent and lower tariffs, it would have to do so for all users, which, combined with the limited capacity for vessel transit due to drought conditions, would significantly impact the Panamanian economy. Approximately 6% of Panama’s GDP ($5 billion) comes from canal revenue. On the other hand, Panama could defend its interests by securing support from the international community or negotiating concessions with Washington on migration issues. Conversely, it could grant migrants unrestricted passage to the US to gain leverage in negotiations with the White House.
Thus, Trump’s recent remarks about possibly returning the Panama Canal to US control are largely populist rhetoric aimed at the American electorate. In reality, Washington has no legal means to reclaim the canal, and the Trump administration’s efforts are most likely to focus solely on reducing transit tariffs.
Comments