As President Trump has eagerly begun his deportation initiative, his attention toward South & Latin America addresses more than immigration. Tensions are rising around the Panama Canal, one of the most significant geographical landmarks in the Western Hemisphere for international commerce. Sources say that China’s presence in Latin America raises concerns regarding infrastructure investment and strategic maneuvering for Chinese interests. This is a prime target for the Trump administration – let’s see why.

What Is the Panama Canal?

In the 1800s, the United States and the UK decided that there needed to be a transit route between the Atlantic and Pacific Coasts to expedite the shipping of goods. After years of negotiations and planning, the Panama Canal was completed in 1914.

The U.S. continued to be a core administrator of business in the canal through the 70s, until the late former-president Jimmy Carter instituted change. In 1977 the Torrijos-Carter Treaty was passed, giving full administrative power to Panama’s PAC – the Panama Canal Authority. Later in 1999, the country fully assumed authority over fuel operations, administration and the maintenance of the canal. PAC has since remained at the helm of control over the Panama Canal, and the country of Panama has generated a significant amount of revenue from this facility. In 2024, 4% of Panama’s Gross Domestic Product (GDP) came from the canal alone.

Today, the Panama Canal funnels hundreds of billions of dollars in world-wide trade every year. It exists as the mainstay for transportation of maritime commerce, proving to be highly cost-effective and efficient for the global supply chain. Nearly 6% of global trade traverses through the canal. Other factors that contribute to the canal’s strategic assets include its economic benefit, the facet for national security and its platform for fostering diplomatic relations.

The Issue Among Diplomatic Relations

Conflict is coming from the Panama Canal’s diplomatic relations platform. The most prominent customers of the canal include the U.S., Chile, China, Japan and South Korea, according to a report by the Council on Foreign Relations listed below. For President Trump, his concerns center around China’s increasing presence in the canal. The microscope upon Panama’s relationship with China may have begun inspection around 2017.

In 2017, Panama made a dramatic appearance in the world of state recognition as the country abandoned Taiwan and officially recognized China. Given China’s present initiative to annex Taiwan, similarly to Hong Kong, Trump has taken it upon himself to remain skeptical of this rising acquaintanceship.

China has developed a significant increase in trade with Latin America – drawing in $500 billion in 2022 compared to the $14 billion in 2000. Panning to South America, China has expanded their economic ties, so it is now their top trading partner and major source of foreign direct investment. Particularly within the Panama Canal, China has occupied and managed two ports (Balboa and Cristóbal) since 1977 through CK Hutchinson Holdings – a Hong Kong-based corporation that is one of the world’s primary container terminal operators. China has also taken the initiative to invest over $2 billion in PAC’s infrastructure projects for the canal.

President Trump is Eyeing the Panama Canal

The context surrounding U.S. involvement in the canal has a controversial streak. Marco Rubio, U.S. Secretary of State, issued a statement saying that Chinese-owned corporations who have a hold on these canal ports are capable of making the canal “into a choke point” if conflict were to ensue. As it stands, the United States has the authority to act only if a military threat toward the neutrality of the Panama Canal exists – this is according to present treaties. The Atlantic Council writes that there is reasonable potential that Panama is close to breaching this sense of neutrality established by the Permanent Neutrality Treaty.

In response to Trump’s desire to “take back” the Panama Canal, the Panamanian President José Raúl Mulino has said that there will be no conversation to discuss the transfer of ownership. However, here is why the Panama Canal is a strategic treasure for the Trump administration.

The Panama Canal has served as a vital resource for the importation and exportation of goods for the United States. Specifically, 40% of US container traffic comes through the canal every year. The Center for Strategic and International Studies (CSIS) states that the canal highlights a large need for U.S. interests in the name of sustained diplomatic engagement and private sector investment. These interests could propose a “two-level game strategy” as the Atlantic Council calls it. Given Trump’s determination to supersede China on the world stage, U.S. involvement would introduce an opportunity to do just that.

The reality is that the United States has not been aggressive enough in canal investment over the years, seeing that Panama has diplomatically recognized Beijing over Taiwan and became the first Latin American country to join China’s Belt & Roads initiative.

Here is what Trump currently has the capacity to do: Increase U.S. investment in the canal and in businesses that support the president’s vision. This would give Trump the ground to suffocate Chinese interests and advance the economic and national security of the United States.

RESEARCH:

Milestones in the History of U.S. Foreign Relations – Office of the Historian

Council on Foreign Relations

Embassy of Panama

PBS

Al Jazeera

Atlantic Council (2)

Industry Week

Center for Strategic and International Studies

Politico

The Hill

Fox News

International Trade Administration

McKinsey & Company

Foreign Policy Magazine

BAIRD