On January 20th, 2025, during his second inaugural address, Donald Trump insisted the United States was going to reclaim the Panama Canal from what he characterized as a Chinese-led takeover. “We didn’t give it to China; we gave it to Panama, and we’re taking it back,” he declared, echoing statements he made in late December about the necessity of bringing the critical shipping lane back under American control. This follows weeks of repeated claims from the President about Chinese soldiers illegally operating the canal, U.S. ships “being ripped off” by exorbitant transit fees, and a now-notorious moment in which Trump declined to reassure the international community that he would not use military force to recover the Canal.

Is Trump right about the Panama Canal? The reality is more nuanced than he makes it seem, as is often the case with international treaties and complex geopolitical infrastructure, but his point about the threat of Chinese influence over the Canal is not entirely baseless. China maintains a significant presence in Panama, including key port operations and a slew of (attempted) foreign investment projects, and has made a concerted effort over the last thirty years to expand its presence in both Panama and other Latin American countries like Peru and Honduras. Beijing, however, does not in any meaningful sense operate the Panama Canal. Panamanian leadership and local officials control the waterway, and there is no tangible evidence that they are beholden to the Chinese state or have acted in a preferential way toward China. If anything, it appears that the CCP’s courting of Panama, after an early spark in 2017, was largely rejected.

Panama and its government, particularly with the 2024 presidential election of pro-America candidate José Raúl Mulino, are both partial toward and heavily economically tied to the United States. Nearly 80 percent of Panamanians have a positive view of the United States — that’s almost double their approval rating of China. The prevalence of negative Panamanian opinions on China has also more than doubled since 2018, mapping well with the narrative that they quickly found the CCP’s advances distasteful. Over 66 percent of traffic through the Canal is tied to American goods, and we are unequivocally the nation’s most important trade partner. While fees in the Canal have gone up substantially in recent years, these fees apply equally to all nations (and are largely related to volume-limiting droughts) — the charitable argument defending Trump’s claim here is that one, fees could be lower, and two, since the U.S. constitutes the vast majority of canal traffic, the fees apply disproportionately to American companies.

Before diving into the specifics surrounding possible undue Chinese influence over the Canal, for the sake of argument: what would a perceived breach in neutrality mean? When Trump hints at the potential for military action, has he completely lost the plot? While the Canal is legally a sovereign part of Panama, and cannot in any reasonable way be “reclaimed,” the United States does have the legal right — per longstanding treaties — to defend the Canal’s neutrality (including with military force) if that neutrality were ever threatened. But “defending neutrality” and “reclaiming the Panama Canal for America” are a far cry from one another. And, ultimately, Trump’s assertions of a Chinese takeover overlook both Panama’s predilections and a string of major setbacks that have limited Beijing’s ambitions in the region, making any boots-on-the-ground intervention unnecessary and unwarranted.

Perhaps, however, this rhetorical overshoot is analogous to that of the Greenland situation. Just as “buying Greenland” (our primer on the deal here) has evolved through the lens of reality to become something more like “establishing an agreement of free association with Greenland,” “reclaiming the Panama Canal” will likely end up manifesting as renegotiated port fees, a tactical reduction in Chinese presence, and a corresponding increase in American participation and oversight. We have allowed our relationship with Panama to atrophy, opening the door for China, a trend that must be reversed.

Concerns about China’s presence in and around the Panama Canal are often centered around the concept of dual-use infrastructure, the idea that since Chinese businesses are legally beholden to both the Chinese Communist Party (CCP) and People’s Liberation Army (PLA), Chinese-controlled infrastructure projects (like ports) have the potential to morph into military installations. Trump’s insistence that Chinese soldiers are “lovingly, but illegally, operating the Panama Canal” likely stems from this interpretation. President José Raúl Mulino, with obvious exasperation, replied that “there are no Chinese soldiers in the Panama Canal, for the love of God.” The truth lies between these two sentiments: no, Chinese soldiers do not run the Panama Canal, but all CCP-affiliated operatives need to be considered potential agents of the state. The question is not, then, whether China can be trusted, but whether or not its entities are in a position to feasibly exert any sort of power over the operations of the canal. Once that determination is made, the need (or lack thereof) for American intervention, backed by the permanent right of neutrality enforcement, can be properly assessed.

Before evaluating the credibility of a Chinese threat to the sovereignty of the Panama Canal, one must briefly revisit its history. The first efforts to create a passage across Panama began in the 1880s under the French — Ferdinand de Lesseps, creator of the Suez Canal, led the project. Rampant disease quickly derailed the undertaking, with an estimated 20,000 deaths of French, Caribbean, and Central American workers. In 1903, Theodore Roosevelt backed Panama’s struggle for independence against Colombia, in return receiving rights to build and operate the new canal. Construction ran from 1904 to 1914, with around 6,000 deaths occurring in this time. (Only 300 of these deaths were American citizens, most were workers from Barbados — Trump’s spurious claim that 38,000 Americans lost their lives during the Canal’s construction likely stems from a conflation with the total French and Caribbean death tolls.) For the rest of the 20th century, the United States controlled and operated the Panama Canal.

Today, the canal is obviously no longer under American purview. On January 9th, 1964, Panamanian students’ attempts to raise their national flag in the U.S.-controlled Canal Zone led to a violent crackdown, leaving at least 21 Panamanians dead. This ignited anti-American sentiment both within Panama and internationally, galvanizing demands for sovereignty. In 1977, President Jimmy Carter and General Omar Torrijos negotiated two crucial accords. The first ended U.S. control of the canal on December 31st, 1999; the second guaranteed the canal’s permanent neutrality and America’s perennial right to enforce it.

It is important to again stress the difference between retaking the canal and ensuring its neutrality: the neutrality treaty specifically states that "only the Republic of Panama shall operate the Canal and maintain military forces, defense sites and military installations within its national territory." Both Javier Martínez-Acha, Panama’s foreign minister, and Alexander Shchetinin, Russia’s foreign ministry official (who asked?), have echoed that the United States does not have license to reoccupy or annex the canal zone.

During this interim period, in 1989, the United States launched a full-scale invasion of Panama in order to oust Manuel Noriega, a despotic Panamanian dictator. This, in addition to the ceding of the Canal to Panama, is what engendered much of the still-predominant pro-American sentiment that envelops the country today.

By almost all accounts, since the handover in 1999, Panama has managed the Canal efficiently and with great success. Why, then, have recent concerns about Chinese influence been making headlines? At first glance, the most obvious flashpoint is the presence of Chinese-affiliated companies at crucial maritime facilities around the canal. Trump has highlighted these footholds as evidence that Beijing is exercising (or has the potential to exercise) undue influence over an essential trade passageway for the United States. The canal is managed by The Panama Canal Authority (ACP), a Panamanian government agency that sets tolls, operates the locks, and conducts maintenance. Private entities handle the port terminals near each of the Canal’s entrances, two of which are managed by a Chinese-affiliated venture: Hutchison Ports (originally Hutchison Whampoa, now part of CK Hutchison) holds leases at Balboa (Pacific side) and Cristóbal (Atlantic side). The other three major ports are as follows: one managed by Taiwan (Colon), one managed by Singapore (PSA), and one managed by the United States (Manzanillo). Assertions like Trump’s that China is in control of the Panama Canal conflate the operation of terminals near the canal — primarily the transshipment movement of large cargo containers between vessels — with the internal operations of the canal itself.

There is, however, some truth to the idea that managing nearby port operations can create opportunities for surveillance and obstruction activities, and the historical origin of China’s activities in the canal zone are somewhat suspicious. Hutchison’s Panamanian presence dates back to a 1997 bidding process, which some U.S. senators at the time claimed was rigged to discourage American firms, which resulted in the Hong Kong-based company securing a twenty-five-year deal at both ends of the canal. In 2021, Panama extended these leases for another twenty-five years, a move seen as controversial given Beijing’s clampdown on Hong Kong’s autonomy in 2020. Corporate records obtained by The New York Times show that Hutchison has joint real estate ventures with major Chinese defense firms, fueling already-substantiated suspicions about possible CCP control.

The circumstances of the 2021 Hutchison renewals, however, require some context. The original 1997 agreement contained an automatic renewal clause, meaning that the Chinese tenure would be peremptorily extended if a deal was not reached, putting Panama under time-pressure to improve terms. American enterprise, at the time, seemed entirely disinterested in canal infrastructure investment, meaning that China had no real competition (and that Panama’s options were limited). This was a major whiff by the United States, who could have easily outbid the Chinese enterprise and claimed control of the ports if they were viewed as a security threat. Interestingly, as of this month, Panama has launched a “severe” audit of Hutchison’s port operation. Some are framing this as a way to reassure Americans of the ports’ neutrality, but my suspicion is that any findings of financial or operational misconduct here will be used as a tool to renege on the renewal agreement and transfer the ports to U.S. control.

Beyond these ports, China has tried to widen its sphere of influence in Panama through a series of cultural and infrastructural initiatives. In 2017, Panama became the first Latin American country to join China’s Belt and Road Initiative (BRI). (That same year, Panama adopted the one-China doctrine and distanced itself from Taiwan.) A slew of contemporaneous public-works projects were started, but these efforts were primarily characterized by failure and an inability to take advantage of Panama. The Panamanian government, after its early missteps, has repeatedly demonstrated that it is too vigilant to fall for the classic debt trap, which played out previously between China and Sri Lanka, rejecting many of the nation’s advances.

In 2016, China tried to deepen its footprint by initiating a $900 million project to purchase and build out a Margarita Island port. The Chinese consortium, Landbridge Group, was ousted by Panama after getting mired in various financial and legal disputes. The port, currently in development (now projected to cost $1.4 billion) after a 2022 acquisition by Notarc, an American company, is in no way affiliated with the Chinese entity. Landbridge is suing desperately, and to no effect, in multiple jurisdictions. In 2018, China attempted to build a major embassy facility at the entrance of the Panama Canal. This was met with contempt from the Panamanian people, and public backlash killed the project before it began. Another major failure was the $4 billion bullet train network, intending to connect Panama City with David, which was proposed under the Belt and Road Initiative. It was subsequently canceled amid public skepticism and cost concerns in 2019. But wait, there’s more — on December 26th, 2024, the American company AECOM USA finalized a contract to take over and complete that very same bullet train network.

Here, a pattern begins to emerge. Yes, China made attempts to heavily invest in Panama and gain cultural footholds, but their efforts are largely marked by failure (and even subsequent American replacement). This should not encourage American complacency, however — Beijing’s presence, while uneven, still poses strategic risks and should be rejected on principle. The United States should see this Panamanian situation and ask itself why substantial action has not already been taken. Despite their many blunders, China does run a couple of the larger ports, maintains in Panama one of the largest Chinese diasporas in Latin America (200,000 people), and has established significant business (e.g. Huawei) and financial (e.g. Bank of China) presence in the country and its Colon Free Zone (CFZ). The fact that Chinese influence in Panama is still relatively limited, in spite of the United States’ ostensible sleepwalking around this issue, is a miracle. China is currently building the fourth bridge over the Panama Canal, something that is often cited as evidence of Panamanian preference, but less cited is the fact that zero American companies competed for the bid. Panama would much rather work with the United States than with China, and this important interpretation of how we arrived at the status quo seems to be underrepresented in the media.

A brief note on the media: some mainstream coverage, including that of The New York Times, has painted Trump’s overtures in a light worse than their true nature by leaving out important context. In a recent NYT article discussing Trump’s Panama Canal discourse, a quote by Benjamin Gedan, director of the Wilson Center’s Latin America Program in Washington, compares potential American military initiatives in Panama to the actions of Vladimir Putin (presumably referencing his invasion of Ukraine). While the forcible reclaiming of the Panama Canal would, in fact, be an “illegal” invasion worthy of condemnation, the article makes no mention whatsoever of the United States’ legal right to forcibly defend the neutrality of the Canal. It mentions the treaties and their guarantee of neutrality writ large, but conveniently ignores this core element of the discourse. This lack of context is, for clarity, the fault of The New York Times, not of Benjamin Gedan. The New York Times again, clearly loving the Putin invocation, used the same quote in a different article (higher up, this time). Here, they very briefly note that the “United States has the right under the treaty to defend the canal if its operations are threatened,” but make no mention of “neutrality” anywhere in the piece, let alone clarify the nature of what might constitute “threatened” operations — a gross omission of context.

In my quest to untangle coverage of the Panama, China, and U.S. triangle, Noel Maurer’s perspective stood out as uniquely prescient. A professor of international affairs and business at George Washington University, and author of the book “The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal,” he seemed to be one of the key people noticing and articulating the narrative that I traced out above: Chinese investments have had limited success, China’s involvement in canal operations is essentially limited to the leasing of external ports, and the United States has a massive advantage in Panama and could fairly easily enact recourse against Chinese operators on the Canal. Maurer notes that in a scenario where Washington demands that Panama evict Hutchison, the Panamanian government could just reissue the port concession to non-Chinese companies. As he put it, “Yes, China would certainly love to take over the Panama Canal. But they’re treading lightly, because they know that the United States could toss them out at any time.”

I was able to get in contact with Maurer and ask further questions about his perspective on the Chinese threat (or lack thereof) in the Canal. “I don't think there is currently a Chinese threat to the Canal,” he said. “In the advent of a prolonged war between the two countries — let's call it World War 3 — there are many ways in which China could attempt to shut down the Canal. None of them require intermodal port facilities, which would be taken over by the United States in the opening days of a conflict.” (These “intermodal port facilities” to which he is referring are the two Hutchison-controlled ports.) He characterized Landbridge’s bungled Margarita Island port acquisition as a “potential Chinese attempt to establish a dual-use facility on the Atlantic side,” noting that it “failed and failed badly.” Maurer also brought up more legitimate dual-use concerns about the Chancay facility in Peru, a major Chinese port installation which became operational in late 2024 and whose total area is over fifteen times larger than the combined size of the Hutchison ports. This is why Maurer has previously highlighted the spatial constraints of the Balboa and Cristobal ports: “There are no soldiers in the Hutchinson ports because there is no room for them. Nor are there other signs of military equipment or space to put it.”

“If the Chinese government really wanted a foothold in the Americas, then they would have gone ahead with the Nicaragua Canal project during the Obama administration,” Maurer told me. This was a $40 billion megaproject intended to rival the Panama Canal as an interoceanic route; it failed after facing financial setbacks as well as local and international opposition. “Even if they hadn't built the full canal, the concession gave the Chinese company HKND so many rights that the PRC could have built an extraterritorial empire. It did not.”

When asked directly about whether or not he sees any real scenario in which China’s port control (or their work on the fourth bridge) could meaningfully disrupt shipping through the passageway, he responded with, “I really don’t. The most realistic scenario I've heard involved the use of containerized missile systems based in the facilities. But why would you do that? You could take out some ships, maybe do some damage to the locks. The former makes no sense; the latter could be accomplished from a passing ship, or a group of commandos prepared to destroy the Gatún Dam.”

Maurer qualified his statements by clarifying that he does “think that a Chinese naval base would be a serious threat to American interests. And I do worry that China could bribe future Panamanian governments with promises of foreign investment and (more effectively) aid.” He then articulated what I believe to be the most realistic conception of the Panama Canal situation, and a prescient call to action, saying that “so far the Chinese have proven really bad at that game [of building lasting influence] in Panama. We need to step ours up, but in Panama we haven’t fallen behind.”

All of this does not necessarily mean, however, there are no legitimate concerns about Chinese port control. While the Hutchison leases are unlikely to give the CCP any obstructive or interventionist power over the Panama Canal’s operations, Chinese companies in control of port infrastructure are often able to gather extensive shipping data through sophisticated logistics platforms. This may give Beijing insight into containerized cargo, U.S. supply chains, and potential military-equipment movements. (Roughly ninety percent of U.S. military cargo moves via commercial ships, so presence at port facilities may improve intelligence-gathering operations). While it is likely that satellite imaging and drone use have rendered the necessity of such positioning somewhat obsolete, the United States should not tolerate this kind of easily rectified adversarial surveillance in its backyard. The ports should be under the control of the U.S. or one of its allied nations.

Speculation that Trump’s brash statements about retaking the Panama Canal is less about preparing for invasion and more about initiating negotiations seems directionally correct. Under the Neutrality Treaty, tolls must remain “just, reasonable, and equitable.” Liquified natural gas (LNG) tankers, vital for the U.S. as it relies on the Panama Canal for 61 percent of its LNG exports to Asia, face higher (and rising) tolls (due to their specialized handling needs) that have frustrated American exporters. The United States can make an argument that the increases are excessive, citing the aforementioned general toll hikes and disproportionate effect on LNG tankers, potentially giving it grounds to reduce tolls in some way. This is likely a significant component of the win Trump is looking for here. Historical precedent exists for the United States using financial pressure or sanctions to steer Panamanian policy: just before the Noriega coup in 1989, the U.S. rendered Panama’s banking system illiquid. The possibility of physical military invasion, however, is remote — the list of easier options is just too long.

Now that Trump has gotten everyone’s attention by threatening the stick, it’s time to offer a carrot — an American version of the Belt and Road Initiative. The United States can, and should, take preemptive action to renegotiate certain toll provisions and encourage Panama to replace Chinese investment and presence with American (or other allied) counterparts. As we have seen with some of the various failed Chinese-initiated infrastructure projects, subsequently restarted by American enterprise, this approach is already gaining momentum. Panama is in charge of the Canal, has been operating it without major disruption, and has earned at least a modicum of trust with its historical loyalty to the United States and eschewing of undue Chinese sway. It seems to me that, of the parties involved in the Panama Canal, America is the one that has not properly prioritized its international undertakings.

While there are no reports (yet) of Trump having spoken directly with Panamanian President José Raúl Mulino, Marco Rubio announced on January 23rd that his first trip as Secretary of State will include a visit to Panama. Greater than the threat of China’s current influence over the Panama Canal is our apathetic disposition toward one of our most vital southern allies. It is time for our corporations, and our government, to step up and give Panama an alternative to Chinese participation in their culture and economy. We have, to our own detriment, allowed this to become a one-sided friendship. Let’s show Panama, and the rest of the world, that it pays to be on America’s good side.

— G. B. Rango