Panama Canal’s Importance to the World and Especially the United States

China has sharply criticized a proposal to sell ports in the Panama Canal to American asset management giant BlackRock, attacking the deal as “spineless groveling” and a “betrayal” of the Chinese people. The Chinese government now questions the sale of CK Hutchison’s port assets to US-based BlackRock.  Due to Beijing’s criticism, shares in the conglomerate CK Hutchison Holdings Ltd. plummeted on Friday. Observers say it was a sign that some investors are concerned the deal may not ultimately go through, if Beijing objects. Also, Panama has not received any contact information that would suggest any upcoming presence of US military personnel to the canal area.  There are no plans, formal or informal in place that would allow the presence of US military forces in Panama. That was the categorical statement from official sources close to President Mulino’s Palacio de las Garzas on Thursday, March 13.

The Panama Canal is an essential infrastructure for global maritime trade, linking the Atlantic and Pacific Oceans and bypassing the long and costly detour around Cape Horn. Approximately 5–6% of global maritime trade transits through this route, facilitating the transport of manufactured goods and raw materials (hydrocarbons, minerals, cereals, etc.). It is particularly significant for the United States, which built it between 1904 and 1914 and administered it throughout the 20th century before handing it over to Panama in 1999 under the Torrijos-Carter Treaties signed in 1977. Since its transfer, it has been managed by the Panama Canal Authority, an autonomous entity separate from the Panamanian government. Its status as an “inalienable national asset” is enshrined in the constitution, ensuring that its management remains under Panama’s exclusive sovereignty.

Nevertheless, the United States continues to view it as a key element of its influence in Latin America and its economic security. The canal is a strategic route for US exports and imports, both between the East Coast and Asia, the West Coast and Europe, and for linking the East and West Coasts of the country. Over 70% of the goods transported via the canal originate from or are destined for a US port, making Washington its principal user. The Panama Canal is also a crucial component of US naval strategy, allowing the US Navy to swiftly transfer vessels between the Atlantic and the Pacific. This reliance on the canal is accompanied by heightened vigilance over its control and management. According to the principles set out in the Torrijos-Carter Treaties, and given the US strategic interest in ensuring the free movement of goods while preventing any foreign interference that could disrupt the canal’s operations, the United States continues to play a role in its security and neutrality. Beyond safeguarding maritime routes, this vigilance extends to monitoring foreign economic and political influence.

Donald Trump has repeatedly stated his intention to “retake” control of the Panama Canal. What should we make of these statements, and what effects have they had?

Between late December 2024 and early January 2025, Donald Trump repeatedly declared his intention to “retake” control of the Panama Canal, citing several justifications. First, he condemned what he described as excessive tolls imposed on US ships using the canal, arguing that they unfairly penalized US economic interests. He also pointed to China’s growing influence, singling out CK Hutchison Holdings, a Hong Kong-based conglomerate operating the ports of Balboa (on the Pacific side) and Cristóbal (on the Atlantic side), located at both ends of the canal. During his inauguration on 20 January, he reiterated his accusations, describing the canal’s handover as a “strategic mistake” and asserting that the United States should never have relinquished control of an infrastructure essential to its commercial and military power.

Panamanian President José Raúl Mulino responded immediately, reaffirming Panama’s sovereignty over the canal and its commitment to maintaining fair access for all ships. He then addressed the United Nations, expressing concerns over the “troubling and unfounded” remarks made by the US president. The situation evolved following a visit in early February by US Secretary of State Marco Rubio to Panama City. In an official statement, he praised Panama’s efforts to uphold transparency and sovereignty over the canal, which remains the United States’ primary trade route and investment hub. This visit, perceived as a demonstration of US influence, was followed by significant political decisions that shifted the balance in Washington’s favor.

First, Panama announced it would not renew its participation in China’s Belt and Road Initiative (BRI), a project it had joined in 2017. This withdrawal marks a clear distancing from Beijing and sends a strong signal to the United States, which viewed the initiative as a tool for expanding Chinese influence in Latin America. Later, Panama’s Attorney General publicly supported the revocation of the concession granted to CK Hutchison Holdings in 1997 for operating the Balboa and Cristóbal ports, a contract that had been renewed for another 25 years in 2021. This move has paved the way for a reconfiguration of strategic port infrastructure control, effectively limiting China’s presence around the canal. These decisions illustrate the precarious position of Panama in the face of great power pressures and Washington’s ability to influence the country’s strategic decisions despite its claims of sovereignty. Panama’s dollarized economy, its lack of a standing army, and its economic dependence on the United States significantly constrain its room for maneuver.

Is the Canal now at the Center of US-China Tensions? How is this Rivalry Playing Out?

The canal has undeniably become a focal point of US-China competition, a struggle that manifests itself economically, diplomatically, and strategically. Since the handover of the canal to Panama, China has gradually expanded its influence in the country, capitalising on the US withdrawal and the opportunities created by Panama’s economic liberalisation. A turning point came in 2017 when Panama severed diplomatic ties with Taiwan to establish formal relations with Beijing. This decision opened the door to an influx of Chinese investment, particularly in port infrastructure and free trade zones around the canal, under the framework of the Belt and Road Initiative.

Washington swiftly responded to China’s growing presence by ramping up pressure from 2018–2019 to curtail Chinese projects in the region and safeguard US economic and strategic interests. Consequently, US-China rivalry is shaping several of Panama’s strategic decisions. While President José Raúl Mulino’s government has recently taken measures favoring US interests, China remains a crucial player: it is the canal’s second-largest user and a key investor in multiple sectors of the Panamanian economy.

This geopolitical struggle was further highlighted in recent days with the acquisition of CK Hutchison Holdings’ stakes in the Balboa and Cristóbal ports by US investment giant BlackRock. Announced in a joint statement on 4 March 2025, this transaction marks a significant rollback of Chinese involvement in the canal’s strategic infrastructure and a reinforcement of US influence. By securing these port assets, BlackRock countered what Washington perceived as China’s tightening grip on this vital maritime trade hub. The $22.8 billion deal was swiftly applauded by Donald Trump, who hailed it as a “re-conquest” of the canal by the United States.

However, the Panamanian government was quick to temper this interpretation: President José Raúl Mulino emphasized that the transaction was a private commercial operation and in no way compromised Panama’s sovereignty over its port infrastructure or the canal itself. This episode underscores Panama’s delicate position, caught between two superpowers vying for control over an essential maritime asset. While the country asserts its desire to preserve its autonomy, economic and geopolitical realities force it to navigate US pressure while maintaining its economic relations with China.

More broadly, BlackRock’s acquisition of the ports and the $20 billion investment in the US announced on 6 March by the French shipping giant CMA CGM—to expand its US-flagged fleet and modernize port infrastructure—fit into a broader Washington strategy to consolidate its position in the maritime sector and counter China’s growing influence over critical global trade infrastructure. This initiative follows the Trump administration’s announcement of new tariffs of up to $1.5 million per docking for ships built in China that call at US ports. This measure has prompted CMA CGM to strengthen its US presence to comply with the new regulations and reduce its dependence on Chinese shipyards.