By: Vanessa Levy Gonik
The Panama Canal, which registers approximately 14,000 transits annually, accounts for six percent of global trade. The United States is the top user of the Canal, with 66% of 2019 cargo traffic either beginning or ending its journey at a U.S. port. Meanwhile, China—though the main source of goods moving through the Colón Free Trade Zone—accounts for only 13% of Canal traffic. Still, China’s increasing presence has turned the Canal into a hot zone for U.S.-China competition. Chinese companies have significantly expanded their presence in the Canal through infrastructure projects in logistics, construction, and energy, aligning with China’s Belt and Road Initiative (BRI) since Panama joined the initiative in 2018. In 2020, China shifted from traditional major acquisitions to supporting Panama’s efforts against the COVID-19 pandemic.
Currently, the Panama Canal Authority (ACP) is responsible for administration and maintenance of the Canal’s resources and security. Central to this arrangement is the Neutrality Treaty between Panama and the U.S., which guarantees permanent neutrality of the Canal and fair access for all nations While only the ACP can operate the Canal, the U.S. retains the right to use military force in response to any threat against its neutrality.
President Donald Trump’s rhetoric regarding territorial ambitions—often seen as exaggeratedly imperialistic—have included a deliberate focus on the Panama Canal, as he seeks to counter China’s expanding influence in the Western Hemisphere. Chinese companies, such as CK Hutchinson operate ports at both ends of the Canal, raising concerns about violations of the neutrality agreement. Control of these ports—Balboa and Cristobal—could allow China to influence or manipulate Canal operations, potentially even shutting it down, posing a threat to U.S. commerce. Marco Rubio, acting as an envoy for President Trump, toured the Panama Canal, making it clear that maintaining the status quo would result in protective measures by the U.S. to protect the Neutrality Treaty.
Although Trump’s initial warnings about the abrupt shift in Chinese policy toward the Panama Canal were ridiculed by Beijing, a Hong Kong newspaper revealed a proposed port transaction between a Chinese and an American company. Under the deal, CK Hutchison would sell its ports at both ends of the Canal—along with over 40 other ports worldwide—for $19 billion to U.S. investment giant BlackRock. The Chinese government harshly criticized the deal, expressing concern that losing control of these ports would jeopardize trade routes to Latin America and lead to increased tariffs if the U.S. gained further influence. The Chinese government has a history of blocking such transactions, and this deal may face a similar fate. Nonetheless, President Trump has welcomed the deal. This puts Panama in quite the pickle. Granting the U.S. control of the ports while an invasion is being discussed is hard to imagine, but blocking the deal might give Trump a pretext for military action. While CK Hutchison remains in an exclusive negotiation period with BlackRock, the deal has not yet been finalized.
