Panamanian Protesters Condemn Deal to Station U.S. Troops around Panama Canal

Protesters took to the streets of Panama City Wednesday to condemn the signing of a memorandum between the U.S. and Panama that would allow U.S. troops to deploy around the Panama Canal for military training.  President Trump has repeatedly threatened to “take back” the Panama Canal.

Camila Aybar: “We protest because they have stomped over the sovereignty of entire generations who have fought. They dumped our sovereignty to the trash by signing a memorandum of understanding that allows foreign military presence in Panama. Down with the memorandum! Down with the memorandum! Sovereign Panama!”

Trump Wants to ‘Take Back’ the Panama Canal. Why that’s Not So Simple

President Donald Trump has called for the US to retake control of the Panama Canal unless the cost of passage for American naval and merchant ships is slashed or even eliminated. Trump’s refusal to rule out the use of force is a throwback to the 19th century era of gunboat diplomacy. While it remains unclear whether Trump is simply posturing, his demand has jolted Latin America, which is less afflicted by territorial disputes than regions such as the Middle East and Asia. It shows a willingness to flout treaties and anger allies to further US interests. It’s also a way of confronting China, which Trump has falsely said is operating the Panama Canal. 

What is the Panama Canal?

The Panama Canal is an important waterway that handles roughly 3% of global seaborne trade. It revolutionized maritime shipping when it opened in 1914, shortening journeys by removing the need to go around South Africa’s Cape of Good Hope or through the Strait of Magellan, a narrow passage on the tip of South America between the Atlantic and Pacific Oceans.

The Panama Canal Connects the Caribbean to the Pacific

Around 75% of the cargo transiting through the Panama Canal is going to or coming from the US, making the country by far the biggest beneficiary of the route. US and China Depend Most on the Panama Canal.  The canal operates through a series of locks, which adjust the water level to facilitate the movement of vessels through the channel, a design that has been celebrated as an engineering marvel. The most recent expansion of the canal in 2016 added a third set of locks and doubled capacity.  Before Trump’s comments added the risk of conflict, the waterway already was under strain from climate change. The system of locks relies on fresh water from Lake Gatun, which plunged to critically low levels during a drought in 2023 and forced the canal to increase transit fees and curb how many ships could pass through for about a year. The artificial lake also is Panama’s biggest source of drinking water.

What’s the Panama Canal’s History?

The Isthmus of Panama, a thin strip of land between the Caribbean Sea and Pacific Ocean, has been a bustling, globalized trade route since the Spanish conquest of the Americas in the early 1500s.  Spanish explorer Vasco Nuñez de Balboa pictured below, led the first European party across the isthmus in 1513.

Before long, conquistadors were marching south across this land link and returning with plundered Incan gold and silver.  King Charles I of Spain commissioned the first viability study for a canal in 1534 and decided it was impossible. The earliest significant attempt to construct a marine route was started in 1881 by France’s Compagnie Universelle du Canal Interoceanique and was led by Ferdinand de Lesseps pictured below, the builder of the Suez Canal, another key trade chokepoint in Egypt.

More than 20,000 workers died of diseases, including malaria and yellow fever, during the nine-year, failed effort.

US President Theodore Roosevelt on a steam-powered digging machine during construction of the Panama Canal, 1908

The US took an interest in the canal project after the French effort was aborted. In 1903, the US, in exchange for permanent rights to build and operate the canal, signed a treaty to guarantee the independence of Panama from Colombia, from which it had just seceded. Under this agreement, the US was permitted to use, occupy and control a 10-mile-wide stretch of land to build the waterway, for a one-time payment of $10 million plus an annual annuity of $250,000. By the 1960s, US control of the waterway was fueling resentment in Panama and the larger region. In 1975, Henry Kissinger, then the US secretary of state, warned of “riots all over Latin America” if the US didn’t renegotiate the canal treaty. The following administration of President Jimmy Carter signed the Torrijos-Carter Treaties in 1977, which handed control of the canal and the Canal Zone to Panama at the end of 1999.  The canal brought in nearly $5 billion in fiscal 2024, or about 4% of Panama’s gross domestic product.

US President Jimmy Carter and his wife Rosalynn pictured above, visit the Panama Canal in June 1978

Why does Trump want to return control of the Panama Canal to the US?  Trump appears to be both airing his own grievance about the US losing control of the canal and pressuring Panama to lower shipping costs. He has said it was “foolish” for the US to give up the canal in the first place and has described the current costs to use the waterway as “ridiculous” and “very unfair.” In late April, Trump called for “free of charge” passage of US ships through the canal. For Trump, the canal also plays into the American rivalry with China, whose growing influence in Latin America through major infrastructure projects has been a concern to both Democratic and Republican administrations in the US.

Trump has falsely said the Panama Canal is operated by the Chinese and controlled by the Chinese military. While China has no role in operating the canal, Hong Kong-based conglomerate CK Hutchison Holdings Limited operates ports along the canal, as do US and Taiwanese companies. Hutchison struck a deal to sell its two Panama port operations to a consortium that includes US-based BlackRock Inc., but Chinese authorities have reacted negatively to the plan. China’s market regulator has said the deal shouldn’t be implemented without its approval.

Are Trump’s Cost Complaints Justified?

The Panama Canal Authority, which has managed the canal and overseen expansion projects for two and a half decades, did increase fees for all operators regardless of nationality in response to the 2023 drought that forced it to curtail traffic. In late 2023 desperate shippers spent as much as $4 million in auctions for one of the limited slots across the canal. The cost of a slot tumbled to around $200,000 by mid-2024, and a freshwater surcharge was largely eliminated after lake levels rebounded.

How has Panama Responded to Trump’s Demands?

President Jose Raul Mulino has affirmed Panama’s sovereignty over the canal and denied any Chinese involvement in its operations. Nevertheless, Panama began weighing whether to cancel its contract with Hutchison. Panama’s Comptroller General Anel Flores accused the company of failing to obtain required approvals for a contract extension in 2021 and owing millions of dollars in dues, allegations rejected by Hutchison.  Mulino also announced he would not renew Panama’s participation in the Belt and Road Initiative, China’s ambitious infrastructure and trade project that extends the country’s global reach.

After a visit to Panama on Feb. 2 by US Secretary of State Marco Rubio pictured above, the canal authority said it would “optimize transit priority” of US Navy vessels. However, Mulino has denied assertions by the Trump administration that such ships would enjoy free passage, accusing the US of “lies and falsehoods.” Panamanian authorities say that a neutrality treaty prevents special treatment on fees and that any exemptions to established rules would lead to chaos.  Mulino has boasted that he’s “closed” the Darien Gap, a section of jungle on Panama’s border with Colombia that migrants hike through on their way to the US. That’s resulted in a plunge in the number of people trying to reach the US by trekking through the area, a priority of the Trump administration.

What Leverage does Trump have over Panama?

The US holds significant economic leverage over Panama as its biggest trade partner and source of foreign direct investment.  While Trump declined to rule out military intervention, it’s considered unlikely that he will violate international treaties and unilaterally retake control of the waterway. Trump has a history of making outrageous statements to bring attention to a topic and initiate negotiations.