China’s Influence in Panama Under Scrutiny After Trump Issues Warning Over Canal

Two cargo ships pass each other during their entry and exit to the Panama Canal at the Pacific Ocean near Panama City on Oct. 6, 2024. Martin Bernetti/AFP via Getty Images

President-elect Donald Trump’s comment earlier this week about the United States potentially regaining control of the Panama Canal has brought renewed attention to communist China’s expanding influence in the Latin American country.

The Panama Canal, which opened in 1914 after 10 years of construction by the United States, was returned to Panama under a 1977 deal signed by President Jimmy Carter. In 1999, Panama took full control of the canal, which is now one of the busiest shipping lanes in the world, connecting the Pacific Ocean and the Caribbean Sea.

Trump took to his Truth Social account on Dec. 21 to criticize Panama for charging “exorbitant prices and rates of passages” for U.S. naval and commercial vessels passing through the canal, while also expressing concerns about the Chinese regime’s growing influence in the waterway.

“It was solely for Panama to manage, not China, or anyone else,” Trump wrote.

If Panama cannot guarantee “the secure, efficient, and reliable operation” of the waterway, the United States “will demand that the Panama Canal be returned to us, in full, and without question,” he added.

Panamanian President José Raúl Mulino responded to Trump’s comments by saying the canal is not controlled by China, Europe, the United States, or any power other than his country.

“Every square meter of the Panama Canal and its adjacent area belong to PANAMA, and will continue to be,” Mulino wrote on social media platform X on Dec. 22.

Trump responded to Mulino’s dismissal on Truth Social the same day, writing, “We’ll see about that!”

‘A Different Way Forward’

The 1977 deal consists of two treaties: the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, also known as the Neutrality Treaty, and the Panama Canal Treaty.

The Neutrality Treaty stipulates that the United States may use its military force to protect the Panama Canal from any threat to its neutrality, essentially allowing the United States to perpetually use the waterway.

Brent Sadler, a senior research fellow at The Heritage Foundation, wrote in an X post on Dec. 22 that the “U.S. concerns over secure access to this vital waterway have merit.”

“It is after all no secret that China controls ports on either end of the canal,” Sadler said.

Former Rep. Matt Gaetz (R-Fla.) wrote on X: “We aren’t taking the canal back from Panama. We are taking it back from China.”

Conservative political strategist Joey Mannarino said on X that Trump “is offering a different way forward” with regard to the canal.

“This is why I liked the choice of [Marco] Rubio as Secretary of State,” he stated.

Last month, Trump nominated Rubio, a longtime China hawk, for secretary of state.

Rubio, who visited Panama in May 2018, has previously shared his concerns about the influence of the Chinese Communist Party (CCP) on the canal.

The canal is “an important transit route to intercept illicit activities, yet the canal is surrounded by #CCP enterprises,” Rubio wrote on X in August 2022.

“We must continue to make clear that Panama is an important partner & warn against CCP attempts to establish a foothold in our region,” he wrote.

CCP–Panama Ties

The CCP began to gain a foothold in Panama even before the U.S.-built canal was fully handed over to Panamanian control on Dec. 31, 1999.

In 1997, Panama awarded a concession to Hutchison Ports PPC, a division of Hong Kong-based company Hutchison-Whampoa, to operate the Balboa port on the Pacific side and the Cristóbal port at the Atlantic entrance of the canal. After a 2015 merger, Hutchison-Whampoa is now known as CK Hutchinson Holdings.

In 2021, under then-Panamanian President Laurentino Cortizo, the Panama Maritime Authority renewed the concession with Hutchinson Ports PPC for 25 more years.

Cortizo’s predecessor, Juan Carlos Varela, who served as president from 2014 to 2019, made several decisions to strengthen the country’s ties with the Chinese regime.

In June 2017, Panama severed diplomatic ties with Taiwan, a self-governing island that the CCP claims to be a part of its territory. The decision drew criticism from Taiwan’s foreign ministry, which accused Varela of succumbing to economic pressure from Beijing.

Five months later, Panama became the first Latin American country to join the CCP’s controversial Belt and Road Initiative (BRI), a global infrastructure strategy that critics have said puts developing countries into “debt traps” with the regime.

A consortium consisting of Chinese state-owned companies was awarded a $1.42 billion contract under the BRI to build a fourth bridge over the Panama Canal in 2018, according to China’s state-run media.

In December 2018, during an overseas trip, CCP leader Xi Jinping met Varela in Panama. The two leaders signed several trade, infrastructure, banking, education, and tourism cooperation agreements.

Chinese tech giant Huawei, whose communications equipment has been banned in the United States on national security grounds, established a regional distribution center in the Colón Free Trade Zone at the Atlantic entrance of the canal in 2015.

When Varela visited China in 2017, the former Panamanian president also met with Huawei’s founder, Ren Zhengfei, according to the company’s website.

Ren is a former director of the Information Engineering Academy under the People’s Liberation Army general staff department.

In April, the state-owned Assets Supervision and Administration Commission of China’s State Council reported on its website that Panama’s Amador Cruise Terminal had recently begun operations.

The terminal, built by China Harbour Engineering Co. on Perico Island at the Pacific entrance of the canal, could become a “vital hub for cruise ship rotation and passenger transit in Central and South America,” the commission said.

U.S. Army Gen. Laura Richardson, former commander of the U.S. Southern Command, said in her posture statement in March that China’s state-owned enterprises “continue to bid on projects related to the Panama Canal.”

Panama-based attorney Alonso Illueca, a specialist in international law, wrote that China’s control over the Balboa and Cristóbal ports “is only part of the influence exerted by a disruptive actor.”

“Currently, China and the CCP have a significant level of influence at the political level and even actively influence foreign policy values and principles,” he wrote, in a 2023 report analyzing the Chinese regime’s influence in the Latin American country.

Illueca said Panama should recognize its strategic interests, reassess its relationship with Beijing, and realize that the CCP “is an actor that tends to take advantage of and exploit the strategic weaknesses of other nations.”