The US President-elect Donald Trump has threatened to take control of the Panama Canal, the strategic waterway connecting the Atlantic and Pacific Oceans.
In a press conference that seemed untethered to international law in its territorial expansionist vision, Trump based his threat on the premise that China was controlling the strategic shipping way.
It is yet to be seen if these are empty threats or if the new President of the US intends to act on them. But, experts see an uncanny similarity in the build-up to Putin’s invasion of Ukraine to Trump’s upping of the ante.
The Panama Canal was built by the US between 1904 and 1914. It was later managed by the US government. In 1964, anti-American riots broke out in the canal zone, and in 1977, US President Jimmy Carter signed the Torrijos-Carter Treaties aimed at maintaining the neutrality of the Panama Canal. The US was to give up control of the canal by the year 2000.
Panama took full control in 1999 and has since operated the canal through the Panama Canal Authority. During his hour-long press conference on January 7, Trump said the US made a terrible mistake by giving up control of the canal.
“They were supposed to treat us well, I thought it was a terrible thing to do,” Trump said at a news conference at Mar-a-Lago. “The deal was they have to treat us fairly; they don’t treat us fairly.” Trump alleged that Panama charged more from the US Navy than from other navies.
“They want our help because it’s leaking and not in good repair, and they want us to give US$3 billion to help fix it,” he said. “I said, ’Well why don’t you get the money from China’ because China’s basically taking it over. … China’s running the Panama Canal.”
The US is the biggest user of the canal. China is the second-largest user of the Panama Canal after the United States. In 2017, Panama cut diplomatic ties with Taiwan and recognized it as part of China, a major win for Beijing. So, while the Chinese military might not be present at the canal, Beijing can certainly influence its operation.
The Panama Canal is of significant economic importance to both the United States and China. Approximately 60 percent of the goods transported through the canal originate from or are destined for the US, while around 20 percent involve China. Roughly 5 percent of global maritime trade passes through the Panama Canal. On average, cargo ships pay more than US$200,000 in tolls for passage.
The fees for the year 2025 are expected to increase, and considering the US is the biggest user of the canal, it will be the most affected. The Panama Canal has unparalleled military significance by facilitating the movement of naval forces between the Atlantic and Pacific Oceans during times of conflict or geopolitical tension.
The key US bases near the Panama Canal are US Naval Station Guantanamo Bay in Cuba, US Southern Command in Doral, Florida, and Joint Task Force Bravo in Honduras.
The neutrality treaty does give the US the right to act if the canal’s operation is threatened due to military conflict — but not to reassert control.
China In America’s Backyard
China might not control the Panama Canal, but it wields increasing influence in South America. China now has strategic ties with 10 out of the 11 Latin American countries. Guyana is the only country in the region with only ordinary and bilateral relations with Beijing. Beijing aims to have a strategic influence in South America to match that of the US.
China was a late entrant in Latin America. However, it has now emerged as the region’s major economic partner. Bilateral trade between the two stands today at more than USD 200 billion. China is also Peru’s largest trading partner, where China inaugurated one of the biggest ports in the region.
Chancay port is 4,500 miles from San Francisco, but geopolitically, it is on America’s “20-yard line.” The US’s main concern is that Beijing would use the port for military purposes, giving it a deep-water port close to the US but far enough to survive in the event of any hostilities. Using the port as a naval facility is not inconceivable.
The US Southern Command thinks that the deep-water port is suitable for Chinese military ships to dock here and can also be used by its survey vessels for intelligence gathering. After all, China operates one of the biggest fleets of survey vessels in the world, constantly mapping the depth of the oceans.
Port infrastructure around the world is critical to US economic and military security. Although vitally important, it is an investment area where China is outpacing the United States. China now dominates maritime trade in terms of volume, shipbuilding activity, and construction and ownership of ports around the world, specifically in the American Red Zone.
