What's happening with the Panama Canal and China?

In his inaugural address on January 20, 2025, President Donald Trump declared his intention to reclaim the Panama Canal for the United States, asserting that “we’re taking it back” and highlighting the significant American contributions to its construction in the early 20th century. He further alleged that China has become the dominant force in the canal’s operations, citing the involvement of Chinese companies in key infrastructure along the waterway, and accused Panama of imposing exorbitant transit fees on U.S. vessels. 

The Panama Canal, completed in 1914, was under U.S. control until 1999, when it was handed over to Panama following the Torrijos-Carter Treaties signed in 1977. These agreements established a framework for the canal’s transfer and its operation as a neutral international waterway. Since the handover, the Panama Canal Authority (ACP), a Panamanian government agency, has managed the canal, investing approximately $5 billion in modernization efforts to accommodate larger vessels. This investment has resulted in an annual net revenue of about $2.5 billion from transit fees. 

Image: Worldbank.org

Regarding Chinese involvement, Hutchison Port Holdings, a Hong Kong-based company, operates the ports of Balboa and Cristóbal, located near the canal’s Pacific and Atlantic entrances, respectively. While concerns have been raised about potential Chinese influence over the canal, experts note that vessels are not required to pass through these ports to transit the canal, and the ACP maintains full operational control. 

In response to President Trump’s statements, Panamanian officials have reaffirmed their sovereignty over the canal. President José Raúl Mulino emphasized that the canal is part of Panama’s “inalienable patrimony” and denied any foreign interference in its operations. He also dismissed claims of unfair treatment toward U.S. vessels, asserting that the ACP charges uniform rates to all ships, regardless of nationality. 

Amid these developments, Panama has initiated an audit of Hutchison Ports to ensure compliance with concession agreements and to address any concerns regarding foreign influence. This move is seen as an effort to maintain transparency and uphold the canal’s neutrality. 

The Panama Canal remains a vital conduit for global trade, facilitating approximately 6% of the world’s shipping traffic, which equates to around $270 billion worth of goods annually. The United States is particularly reliant on this route, with 40% of its container traffic passing through the canal. 

In summary, while President Trump’s remarks have reignited discussions about the Panama Canal’s ownership and management, the canal continues to be owned and operated by Panama. The ACP ensures its neutrality and efficient operation, and Panamanian authorities remain committed to maintaining sovereignty over this critical international waterway.