President Donald Trump seems serious to keep a check on Chinese operations across all fronts after resuming his second term in the office. Though he wishes to keep the debate open on the issue of imposing tariffs on Chinese products, but it is the influence that China has over the Panama Canal operations that has visibly irked him. Trump highlighted the overcharging of American vessels passing through Panama Canal that at certain transit points is controlled by Honk Kong based firm CK Hutchison. CK Hutchison was given the concession to oversee operations of two of the five ports positioned on the either sides of the Panama Canal by the Government of Panama in 1997.
Trump considers involvement of a China-governed country in operations of Panama Canal as a breach of trust by the Panamanian Government. During his inaugural speech hestated that it was a foolish decision by the then US President Jimmy Carter to give away the reigns of Panama Canal in 1999 to Panama, which now is hitting the US interests hard. Trump for this reason wants to claim Panama Canal and its operations back. The US administration under Trump is wary of China’s control at certain Panama Canal’s transit points and knows China would use it as a tactic to choke American trade flourishing via the sea route.
CK Hutchison is a Chinese firm and a big port investor that operates from Hong Kong and has stakes in 52 ports across 26 countries. CK Hutchison operates Balboa and Cristobal ports of the Panama Canal, and this is supposedly done under administration of Panama Canal Authority, which the US denies as the charges for their ships passing by are constantly rising. The Panama Canal Authority is conducting regular audits of the CK Hutchison and its tolls, but the Chinese firm always somehow manages to get a clean chit. Notably, CK Hutchison has got its second 25 years lease to operate Panama Canal’s ports in 2021, that too without any hassle.
Panama Canal is a major waterway transit point between the Caribbean Sea and Pacific Ocean constructed by the US from 1904 to 1914. It was after the World War II, the control of the Panama Canal and zone around it by the US became contentious. The big spark came after the Suez Canal Issue in 1956 that led to the US using diplomatic might to force the France and the UK let go of the attempts to take over Suez Canal operations. This also resulted in a tense era between the US and Panama.
It was later in 1977, the situation started getting normalized when there were two treaties signed between the US President Jimmy Carter and Panamanian leader Omar Torrijos. Finally, it was in 1999 the Panama Canal Authority took complete handover of Panama Canal from the US, and ever since the Panama Canal has become an economic asset for the Panamanian government.
For last 25 years, the operations of the Panama Canal have grown manifold under the Panamanian control. A key source to global trade the canal has become a significant point of trade and commerce where larger ships can easily pass through between the Caribbean Sea and Pacific Ocean. In 2024, the Panama Canal’s revenue stood at whooping $5 billion, reflecting upon its strategic importance. Moreover, 5% of global trade is directed through the Panama Canal permitting the cargo from the United States, Asia, and East Coast to cross over. Panama Canal is also a key to US trade because 40% of the US ships travels through its ports. In percentage, the US is the primary user of Panama Canal route with 74% of its cargo being shipped through it, followed by China (21%), and Japan (14%).
The December 2024 speech by Donald Trump has raised a storm where he categorically demanded the Panama Canal to be returned to the US. Panamanian President José RaúlMulino later responded to Trump by stating, “Every square meter of the Canal and its adjacent zone belongs to Panama and will continue to do so. The sovereignty and independence of our country are not negotiable.” He noted that the Torrijos-Carter treaties are bedrock of Panama Canal’s operations that ensure permanent neutrality to guarantee its safe operations for all nations.
But the Trump’s regime accuses the Panamanian government of colluding with the Chinese by giving access to the Panama Canal and its operations. These US allegations are further backed with the fact China spending billions of dollars in development projects in and around the Panama Canal. In 2016, China’s Landbridge Group secured a $900-million contract to manage the Panama Canal’s largest Margarita port, also the entrance to the Atlantic.
Panama Canal is a key to China’s Latin America policy through which it wants to enhance its presence in the region. Diplomatically China has already gained a brownie point by making Panama severe ties with Taiwan in 2017. A year later, Panama signed for China’s Belt and Road Initiative (BRI) and by December 2024 around 21 Latin American countries had cozied up to the initiative.Another threat is China using its technologies in the Panama Canal, for example, Huawei installing surveillance cameras which again can be used for spying in the area.
Trump, for now, is extremely watchful of China’s movements in Latin America as he moves ahead with his “America First” vision. He would also further be hopingof co-operation from countries in the Latin American region to curb other Chinese threats like drug trafficking and migration. In all, Trump dreams of a golden era for the US and here China is its biggest rival.