The Panama Canal, a key artery for global trade, has emerged as a focal point of geopolitical tension as US President-elect Donald Trump raises alarms about China’s expanding influence in the region.
Driving the news
- Trump has recently made headlines with provocative statements regarding Panama, Canada, and Greenland.
- In relation to Panama, Trump has criticized the fees charged by the country for ships passing through the Panama Canal, describing them as “ridiculous, highly unfair.” He threatened to demand that the canal be returned to US control if Panama does not reduce these fees, reviving a nationalist rhetoric about reclaiming a “vital national asset” that the US once controlled until 1999. This stance has been met with firm rebuttal from Panama’s President José Raúl Mulino, who emphasized Panama’s sovereignty and control over the canal.
- Concerning Canada, Trump has engaged in what appears to be trolling by suggesting that Canada could become the 51st US state, referring to its Prime Minister Justin Trudeau as “Governor” and linking this proposal to his threats of imposing tariffs on Canadian goods.
- Meanwhile, Trump’s interest in Greenland has been reignited, echoing his earlier attempts during his first term to purchase the island from Denmark for national security reasons. He has stated that the US “feels that the ownership and control of Greenland is an absolute necessity,” which was met with a clear rejection from Greenland’s Prime Minister Mute Egede, who declared, “Greenland is ours. We are not for sale.”
Merry Christmas to all, including to the wonderful soldiers of China, who are lovingly, but illegally, operating the Panama Canal (where we lost 38,000 people in building 110 years ago), always making certain that the United States puts in Billions of Dollars in “repair” money, but will have absolutely nothing to say about “anything.”
US President-elect Donald Trump
Why it matters
- The Panama Canal, a critical artery of global trade, has become a focal point in the strategic rivalry between the United States and China. Carrying nearly 6% of global commerce and 57.5% of US-Asia container traffic, the canal remains vital for economic and geopolitical stability. However, China’s growing economic footprint in Panama’s ports and infrastructure has raised concerns in Washington over Beijing’s influence in this pivotal chokepoint.
- The Panama Canal’s significance goes beyond its logistical value in global trade. It has become a flashpoint in the broader struggle for influence between the world’s two largest economies:
- Economic importance: Over 70% of the canal’s traffic involves goods originating in or destined for US markets, underscoring its critical role in maintaining US supply chains and consumer goods flow.
- For China, Panama serves as a strategic entry point into Latin America, a region where Beijing has steadily increased its investments.
- Geopolitical stakes: The canal’s neutrality is guaranteed under the US-Panama Neutrality Treaty, which ensures equal access to all nations. However, growing Chinese influence raises questions about the potential erosion of this principle.
- The US has signaled concerns that Chinese investments in canal-adjacent infrastructure could enable Beijing to monitor or potentially disrupt operations in the event of a geopolitical conflict.
- Global trade balance: Any disruption to the canal’s operations would ripple across global supply chains, affecting the movement of goods, especially between Asia and the US East Coast.
Zoom in: Chinese influence
- China’s growing presence in Panama is multifaceted, blending economic investments with strategic positioning.
- Since Panama shifted its diplomatic allegiance from Taiwan to Beijing in 2017, Chinese investments in the region have surged. Panama became the first Latin American country to sign onto China’s Belt and Road Initiative (BRI), a global infrastructure development strategy aimed at extending China’s geopolitical influence
- Ports and infrastructure: Hutchison Ports PPC: This Hong Kong-based company operates ports at both ends of the canal, Balboa (Pacific side) and Cristobal (Atlantic side), giving China a significant role in the region’s logistics.
- Panama-Colón Container Port: A $900 million project on Margarita Island, funded by the China-based Landbridge Group, adds a deep-water port for megaships, boosting China’s logistical reach in the Western Hemisphere.
- Strategic projects: The Fourth Bridge: China Communications Construction Company (CCCC) was awarded a $1.4 billion contract to build a fourth bridge over the canal. Though delayed, the project reflects Beijing’s ongoing interest in cementing its role in Panama’s infrastructure.
- Energy facilities: Investments such as the $900 million natural gas-fired power plant by Shanghai Gorgeous Group have expanded China’s influence beyond logistics.
The big picture
The growing tension over the Panama Canal underscores the broader struggle for influence between Washington and Beijing:
US concerns: The Biden administration has expressed unease over the extent of Chinese involvement in Panama. US ambassador Mari Carmen Aponte noted that the canal must remain neutral, emphasizing, “We do not want to put Panama in a position where it must choose between the United States and China.”
Recent US military statements highlight fears that Chinese-controlled infrastructure near the canal could be used for surveillance or other security threats.
Trump’s recent comments may reflect a newly muscular interpretation of his America First policy amid rising alarm about what the commander of US forces in the region this year called China’s significant presence on America’s “20-yard line.” At the same time, the incoming administration may see Latin America as an easier place to exert foreign policy pressure — or at least the image of toughness — than some other parts of the world.
An article in the Washington Post
Panama pushes back: Panamanian officials have firmly rejected Trump’s assertions. President José Raúl Mulino emphasized that the canal is fully sovereign and operates under the principles of the 1977 Torrijos-Carter Treaties, which transferred control of the canal from the United States to Panama. The treaties also guarantee the canal’s neutrality and nondiscriminatory access for all nations.
Every square meter of the Panama canal and the surrounding area belongs to Panama and will continue belonging so.
Panamanian President Jose Raul Mulino
Chinese officials have also dismissed Trump’s claims. Mao Ning, a spokesperson for China’s Foreign Ministry, stated that “China will, as always, respect Panama’s sovereignty over the canal and recognize the canal as a permanently neutral international waterway.”
Regional implications
As a strategic hub for global trade, Panama’s decisions will resonate across Latin America. Countries like Colombia and Costa Rica closely watch these developments, as they seek to navigate their own economic ties with China and the US.
What’s next
- Several developments will shape the future of the Panama Canal’s role in global geopolitics:
- US re-engagement:Washington may ramp up efforts to counterbalance Chinese influence by offering infrastructure investments, trade agreements, or defense cooperation with Panama.
- Beijing is also likely to double down on its economic diplomacy, presenting itself as a reliable partner for Panama’s development while downplaying security concerns.
- Chinese firms could push for additional concessions in logistics, energy, and infrastructure to consolidate their presence.
- Panama’s strategic calculus:
- Panama’s government will need to balance its relationships carefully, ensuring that it maintains autonomy over the canal while leveraging investments from both the US and China.
- Decisions like the Port of Cristobal renewal and the future of the Fourth Bridge project will be critical tests of Panama’s ability to navigate these pressures.
Bottom line
The Panama Canal is more than a waterway; it is a strategic battleground in the escalating competition between the US and China. While Panama asserts its sovereignty, the geopolitical currents around the canal show no signs of calming. The country’s decisions in the coming years will shape the dynamics of global trade and influence the broader balance of power in Latin America.
(With inputs from agencies)
