Is Trump Coming For The Panama Canal?

There is no doubt that President Donald Trump is a master dealmaker, and the international community has been accustomed to Trump’s seemingly eccentric demands and threats since his first term. However, Trump seems intent on making his demands even bolder in his second term. Since Trump consolidated his power in Congress and among Republicans after his recent election victory, his hand is stronger than ever. Trump’s threats are largely part of his negotiating tactics. They are rhetoric he uses to align foreign states with his policies and gain leverage. However, when it comes to Trump, it is impossible to dismiss his statements as mere rhetoric.

Trump's ideas to annex the territories of other states to the U.S. are among the latest examples of his dealmaker policies. It became a hot topic when he jokingly told the Canadian Prime Minister at a dinner in November 2024 that Canada could become the 51st state of the U.S. In his statement on Truth Social on December 22, 2024, Trump declared that it was an "absolute necessity" for the U.S. to control and own Greenland, which belongs to Denmark. 

Finally, also on December 22, 2024, Trump declared on Truth Social that Panama charges excessive fees to U.S. ships as they transit the Panama Canal and that if the Canal is mismanaged, the U.S. may seek its return. He also claimed that China was illegally operating the Canal and that Chinese soldiers posed a security threat. Two days later, he reiterated these claims at AmericaFest in Arizona. 

Trump continued publicly discussing the issue, stating that negotiations with Panama had begun. He also said that the Panamanian government had approached the U.S., seeking assistance to repair the Canal. In response, Trump suggested they turn to China for help instead.

So, am I worried that Trump will come and take over the Panama Canal? Is there any moral and legal basis for Trump to threaten a nation's sovereignty and demand privileges for Americans in international trade? Let's answer these questions by examining Trump's claims one by one.

THE TRUTH BEHIND THE PANAMA CANAL CONSTRUCTION

The Panama Canal is the heart of Panama, and 6% of global maritime transportation occurs through the Canal. Measuring 82 kilometres in length and width, the Canal was built between 1904 and 1914. It connects the Atlantic and Pacific Oceans using a series of locks. The first attempt to construct the Canal occurred between 1881 and 1889 under French leadership, but it failed due to technical challenges, disease outbreaks, and financial issues. After Panama gained independence in 1903, the United States secured construction rights through the Hay-Bunau-Varilla Treaty and began work in 1904. The Canal was completed and officially opened on August 15, 1914. The United States managed the Canal for 85 years, from 1914 to 1999.

Trump claims that “thousands of Americans” — as many as 36,000 — lost their lives during the construction of the Panama Canal. This is entirely false. The majority of fatalities during the Canal’s construction were not Americans. Most of the workers who died were Chinese, Caribbean, and Haitian. Including deaths from the earlier French effort may bring the total figure closer to the 36,000 that Trump cited, but even then, the deaths were mainly non-American. Misrepresenting history in this way only inflates the American role while dismissing the immense sacrifices made by others.

WHY DID THE U.S. TRANSFER THE PANAMA CANAL TO PANAMA?

With the end of colonialism after World War II, many countries increased their demands for independence. Still, the U.S. continued to control the Panama Canal because of its strategic and military importance. In the 1964 Flag Incident, many people lost their lives in clashes that erupted when Panamanians wanted to hoist their flag in the Canal area. This incident strengthened Panama's claims for sovereignty over the Canal.

The Canal was critical for the U.S. in terms of trade and defence. Conversely, Panama argued that Canal revenues should directly contribute to its economy.

The Torrijos-Carter Treaties, signed in 1977 by U.S. President Jimmy Carter and Panamanian leader General Omar Torrijos, ensured that control of the Canal was transferred from the U.S. to Panama. This transfer was completed on December 31, 1999, and Panama gained full sovereignty over the Canal.

Under the Panama Canal Treaty, the U.S. abandoned all operational control and legal claims over the Canal. In addition, the Neutrality Treaty guarantees that the Canal will remain neutral and open to ships of all nations. Both countries are committed to defending the Canal. The U.S. reserves the right to intervene militarily only in situations threatening the Canal's neutrality. However, this right does not mean ownership or operational control over the Canal.

The Panama Canal's high maintenance costs were prominent among the reasons for the U.S. withdrawal. In addition, increasing international pressures and changing geopolitical priorities after the Cold War made it necessary for the Canal to be managed impartially.

Trump's claim that the U.S. deserves special toll rates is baseless. Such a request violates international trade law and undermines fair competition

ARE AMERICAN TAXPAYERS LOSING BILLIONS OF DOLLARS BECAUSE OF THE PANAMA CANAL?

Trump claims that American taxpayers are losing billions of dollars because of the Panama Canal. This is also not true. The Canal's operating costs and revenues are under Panama's sovereign control. The U.S. government only pays passage fees for military ships. If Trump believes that this cost is problematic, he should address the vast military spending of the U.S.

Ships owned by private individuals and companies pay passage fees to which American taxpayers have no tax connection. In addition, Panama Canal fees are applied equally to everyone, according to the size and load of the ships. One of President Carter's aims in transferring the Canal was to ensure that operating fees were equal for all countries. Trump's claim that the U.S. should be subject to special pricing is entirely unfounded. The U.S. request for privileged fees is contrary to international trade law and constitutes a violation of competition. 

The Panama Canal’s water level has decreased due to a drought in recent years, and passages have been reduced and slowed down to protect it. As a result, Canal fees have increased, and this fee increase has been reflected equally for everyone utilizing the Canal.

WHY IS TRUMP THREATENING A FRIENDLY COUNTRY?

Trump’s rhetoric may be calculated to pressure Panama to agree on more favourable terms in future negotiations. He likely aims to unsettle Panamanian officials and create leverage by making exaggerated and inflammatory statements. 

However, this approach risks damaging the relationship with a key partner and overlooks the fact that the U.S. already pays standard toll rates. Trump’s bluster might resonate with his base, but it is counterproductive in international diplomacy.

PANAMA’S SOVEREIGNTY AND CANAL REVENUE

The Torrijos-Carter Treaties cemented the Panama Canal as a sovereign Panamanian territory. One key aspect of this agreement was that no country would receive preferential treatment regarding tolls, and Panama’s canal management has been widely regarded as efficient and fair.

The revenue generated by the Panama Canal is crucial to maintaining Panama’s economic stability and low-tax environment. Any disruption to this revenue stream could force Panama to seek alternative funding sources, potentially impacting its citizens’ quality of life and the broader economy.

Like oil revenues in the UAE, Canal income enables Panama to sustain a stable and prosperous society without heavy reliance on direct taxation. If taken seriously, Trump’s remarks could jeopardize this delicate balance, harming Panama and the broader international trade system that relies on the Canal.

Hong Kong’s CK Hutchison Holdings has managed ports at both entrances of the Panama Canal through the Panama Ports Company since 1997

ARE THERE CHINESE SOLDIERS IN THE PANAMA CANAL?

Another of Trump's reckless claims is that Chinese soldiers are in the Panama Canal. This claim is also completely false, and Panamanian President Jose Raul Mulino has categorically denied it. The Canal is entirely under Panamanian sovereignty. International observers monitor its management, and no reports of mismanagement have been recorded. 

The Chinese in question are Hong Kong-based shipping company CK Hutchison Holdings, which manages two ports at the entrances to the Panama Canal. This is not a new development. CK Hutchison Holdings has managed these ports through the Panama Ports Company (PPC) since 1997, under the regulation of the Panamanian government.

Panama has honoured its agreement with the U.S. since the canal’s transfer under a formal treaty. Trump’s accusations and threats are entirely baseless

CONCLUSION

In the end, I am not worried that Trump will send the U.S. military to seize the Panama Canal. Still, he will undoubtedly push the Panamanian government to its limits to secure a better deal.

However, Trump's statements regarding the Canal are historically and economically misdirected. Yes, the U.S. built the Canal with engineering skills and funding, but it came with the hard work and sacrifices of Panamanian, Caribbean, and Chinese workers. Panama has honoured its agreement with the US since the Canal was handed over under a formal treaty. Trump's accusations and military threats are entirely unfounded. If American taxpayers worry about wasted funds, the spotlight should be on the country’s massive military budget, not on Panama.

Global politics continues to drift toward turbulence. In this heightened uncertainty, the best thing you can do for your freedom and wealth is to build a Plan-B. I am happy to help you through these uncertain global economic conditions.