The US is right to be concerned about China’s influence over the Panama Canal

President-elect Donald Trump’s recent rhetoric about territorial ambitions in the Western Hemisphere—ranging from the recapture of the Panama Canal and purchase of Greenland to annexes Canada— generated considerable attention and speculation about the new administration’s plans. Among these imperialist ambitions, the restoration of the Panama Canal stands out as a central point of immediate and relevant strategic importance. On Tuesday, Trump deliberately refused to rule out the use military forceretaining maximum power in the previous unilateral negotiations.

Why is Trump now focused on these issues? The statements of the future president probably represent calculation game on two levels strategy: Internationally, Trump is seeking to tackle rising canal transit fees while countering China’s growing influence in the Western Hemisphere. Domestically, this rhetoric appeals to his political base. While sudden and public expressions of displeasure regarding Panama and the canal risk undermining hemispheric stability, legitimate concerns about growing Chinese influence over the canal demand Washington’s attention and justify a measured, diplomatic approach.

Intervention in sovereignty

The origins of the Panama Canal and US intervention are inextricably intertwined. After unsuccessful negotiations with Colombia, the United States turned to the independence of Panama in 1903, and President Theodore Roosevelt employed “artillery diplomacy” to deter Colombian resistance to the movement. The award for military support and American recognition of the Republic of Panama was Hay-Bunau-Varilla treatmentwhich granted the United States permanent control of a ten-mile-wide canal zone for ten million dollars fall and $250,000 a year. After significant investment by the US blood and treasurethe US-built canal remains a remarkable engineering achievement and a critical artery of global trade. However, the political settlement of 1903 sowed deep-seated discontent over perceived violations of Panamanian sovereignty.

In 1977, President Jimmy Carter championed the Torrijos-Carter Agreements, with the goal of fostering goodwill and strengthening US-Panama relations. To secure Senate ratification, two treaties were negotiated: one to carry the channel until the turn of the millennium, and the other to ensure permanent neutrality. The Senate ratified the treaties thinnest margins. On December 31, 1999, Panama took control of the canal.

The Panama Canal is critical to global shipping, offering unparalleled efficiency for trade between Asian and eastern ports of the Americas. Alternatives such as overland transport or Cape Horn navigation increase distance, cost and environmental impact, while Arctic routes are seasonal and geopolitically limited. As the most reliable maritime link between the Atlantic and the Pacific, the canal remains irreplaceable.

China’s expanding influence

Trump’s recent comments on Panama Canal transit fees and Chinese influence have pushed the canal to the forefront of US strategic discourse. Chinese companies such as Landbridge Group and based in Hong Kong CK Hutchison Holdings now manage ports at both ends of the channel. This presence raises concerns about potential dual-use infrastructure and strategic maneuvering, especially with regard to China deepening ties to Latin America.

The United States has significant economic power over Panama. As the canal’s primary user and largest supplier of foreign aid to Panama—3.8 billion dollars annually—the United States can influence decision-making in Panama. Conversely, the United States and its partners present few viable alternatives to Chinese investment in the region, a reality that is unlikely to change in the short term. Will Panama prioritize alignment with US interests to protect that support, or will it risk the economic consequences of favoring China and its control over this vital trade route? Alternatively, could US economic retaliation, Panamanian backlash, and Chinese competition escalate tensions to the point that intervention is warranted under the treaty?

Transportation feeswhich are calculated using a universally applicable formula, have risen sharply in recent years. In part, these fee increases are a response to droughts in 2023 and early 2024, which limited the number of ships that can pass through the canal. The authorities raised the fees to prevent the loss of revenue from transit restrictions. Nevertheless, if costs continue to rise and China continues to expand its presence around the canal, there may be louder calls to revive it Roosevelt’s corollary to the Monroe Doctrine. This corollary affirms the right of the United States to intervene in the region to ensure stability and prevent foreign interference.

Legal framework

Trump’s claim that the Panama Canal agreements were “the bad part” of Carter’s legacy is a simplification of the nuanced legal and geopolitical complexities surrounding the Panama Canal. The Treaty of Permanent Neutrality obligations imposed on both parties. An argument can certainly be made that Panama has violated or is close to violating some of its treaty obligations:

• Transportation fees: Panama has pledged to ensure that tolls and related charges for transportation will remain “fair, reasonable, equitable and in accordance with international law.” US Senate consent The treaty was based on the understanding that the determination of fees would take into account US interests, including factors such as the feasibility of alternative modes of transportation and the goal of maximizing US international trade. While shipping fees may be flag independent, they have a disproportionate impact on US shipping. Interpretations of reasonableness may vary, but it is clear that Trump views the current fees paid by American companies as “excessive.”

• Neutrality: Both sides agreed to maintain the permanent neutrality of the channel with special emphasis on securing access for warships. China’s economic control on both sides of the canal raises concerns about the possibility of rapid militarization and its ability to control access to the canal. Panama’s willingness to relinquish critical economic control over strategically important areas and infrastructure is a hallmark China’s Belt and Road Initiative strategy — casts doubt on Panama’s determination and ability to effectively protect the neutrality of the canal as agreed upon in the treaty. The costs of violating neutrality are significant enough that the United States can justifiably take preemptive action.

This rhetoric, while appealing to nationalist sentiments, risks undermining decades of diplomacy, established international law, and US-Panama relations. However, Washington cannot afford to ignore China’s growing influence, especially given the strategic importance of the canal in the US-China competition—China ranks as its the second largest bather. Trump’s statements are likely intended to pressure Panama on transit tariffs, warn Panama of increased reliance and cooperation with China, and project US resolve. To protect its interests without destabilizing the region, the United States must approach this situation with strategic foresight and diplomatic precision.

Gregg Curley is 2024-2025. a US Marine Corps fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security.

The views expressed in this article are personal and do not reflect the views of the US Department of Defense, the US Department of the Navy, or the US Marine Corps.

Additional reading

Image: Singaporean container ship MAERSK TAURUS passes through the widened channel through the Cocoli Locks on the Panama Canal, on the outskirts of Panama City, Panama, August 12, 2024. REUTERS/Enea Lebrun/File Photo