EXPERT INTERVIEWS — The Panama Canal has landed squarely in the national security conversation, thanks to a series of remarks by Donald Trump, who as President-elect and in his inaugural address Monday has cast the status of the canal as an issue that requires urgent attention.
“We have been treated very badly from this foolish gift that should have never been made,” Trump said at the inaugural Monday, referring to the 1977 Panama Canal Treaty which resulted in the U.S. ceding ownership of the canal to Panama. “Panama’s promise to us has been broken,” Trump added, buttoning the point with a pledge to restore U.S. sovereignty over the waterway: “We’re taking it back.”
The status of the Panama Canal didn’t make The Cipher Brief‘s list of top global security concerns for 2025 (neither did Greenland, which is the sovereign territory of Denmark, a NATO ally, but as we reported recently, Trump has said the U.S. must take control of that territory as well). Trump has brought up U.S. control of the canal now over a claim that Panama is “ripping off” the U.S. by charging high fees for passage, and a separate charge that China is now “operating the Panama Canal.”
Trump isn’t the first American president to raise the issue of U.S. control. In the 1980 presidential campaign, Ronald Reagan criticized the incumbent, Jimmy Carter, for the treaty that gave the canal to Panama, arguing that “We bought it, we paid for it, we built it.”
The U.S. built the Panama Canal between 1904 and 1914, taking over from a French company that had failed to finish the job. Hundreds of Americans died in the decade it took to build the waterway. Trump has repeatedly – and falsely – said that the U.S. “lost 38,000 lives in the building of the Panama Canal”; the vast majority of workers who died were from Central American and Caribbean countries.
As for the “ripping off” charge, which Trump says has impacted both U.S. commercial and naval traffic through the canal, passage rates have gone up, but Panamanian authorities have attributed that to a recent drought caused by El Nino, and they say the rates have affected all traffic through the canal.
Regarding China’s role at the canal, China is not “operating the Panama Canal” as Trump claims but is heavily-invested in infrastructure around the canal. And there is concern about the presence of Chinese companies in Panama that are involved in management, infrastructure and digital services. Panama’s President Jose Raul Mulino said recently, in response to Trump’s claims, that the canal is “forever” his country’s.
The Cipher Brief spoke with three experts – former Acting Executive Director of the CIA Martin Petersen, former U.S. ambassador to Venezuela Patrick Duddy, and Director of the Americas Program at the Center for Strategic and International Studies Ryan Berg, to help better understand the concerns surrounding the Panama Canal, Trump’s claims and and what may come of his promise to “take it back.” Their comments have been lightly edited for length and clarity.
THE EXPERTS
Why Does the Panama Canal matter?
Duddy: The canal was initially constructed largely for national security reasons. Over more than a century, it metamorphosed into a utility that was and remains of fundamental importance to the U.S. economy. About 40% of all of container traffic to and from the U.S. passes through the canal, [which] constitutes something close to 5% of global trade. The U.S. is the canal's largest customer, predictably enough, as the world's largest economy.
The canal remains important militarily. A substantial number of U.S. military vessels pass through the canal, almost daily, and by treaty they enjoy an expedited treatment and can, in the event of a real crisis, move to the very front of the line. I was in Panama as a diplomat during the process when we were turning over military facilities and about to turn over the canal. The apartment where I lived looked out on the Bay of Panama. Sometimes ships can be lined up there for quite a long time. Expedited passage is a very important consideration.
There were actually two Panama Canal Treaties. The first had to do with the transfer of the canal to the Republic of Panama. The second is called the Treaty of Permanent Neutrality, that assures the commitment of both the United States and Panama to assure that the canal remains secure, open, accessible, and neutral, and even includes language which envisions the U.S. or Panama jointly or unilaterally defend[ing] the canal should it need to be defended.
Petersen: Southcom (U.S. Southern Command) says it best: it's a global strategic chokepoint. It is the principal connection between the Atlantic Ocean and the Pacific, not only for global trade, but for military and strategic purposes as well. And if you look at what's going on in East Asia and the complex political and threat situation there — and I'm not just talking about our issues with China, but you've also got North Korea as well — the ability to move U.S. forces, especially naval forces, quickly and efficiently from one ocean to the other is absolutely critical to U.S. security. The only other options are to sail around Latin America or try and go north through the Arctic, but then you've got ice and other seasonal situations there.
Berg: Military planners have known since at least World War II that in order to transit from the Atlantic to the Pacific or the Pacific to the Atlantic, you need an interoceanic canal. And The Panama Canal has become critical for that reason as well.
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What is China's Role at the Panama Canal?
Duddy: I recall as we were approaching the end of the transitional period, there was a lot of discussion then because one of the companies that had won the elicitation to manage canal services at one end was Hutchison-Whampoa. There was a concern in some quarters that it was manifestly connected to certain parts of the Chinese government, and therefore might act in a way that would be discriminatory toward the United States. The irony there was that Hutchinson-Whampoa was already managing a number of American ports. So, it was not an argument that seemed to go anywhere.
Berg: CK Hutchinson today is a Hong Kong-based consortium. It has port infrastructure and runs ports throughout much of the world. Previously, it wasn't as much of a concern for the United States when Hong Kong was a separate entity. That concern grew when China effectively took over Hong Kong and, most importantly, subjected Hong Kong to the Chinese national security law. What that means is that CK Hutchinson as a company would be obligated, if the Chinese Communist Party so desires, to hand over things that are in its possession — data that it collects from the canal, potentially commercially sensitive data on freight, container traffic, who is moving what and with what frequency. These are, even in peacetime, pieces of data that could be highly sensitive and important because the U.S. is actively seeking to build greater economic resilience, particularly supply chains that don't touch the People's Republic of China.
Then there's all the infrastructure around the Panama Canal. There are bridges over the Panama Canal. There are other ports around the Panama Canal that are being built, one on the Atlantic side, for example, at the port of Cologne. There's the Chinese Communications and Constructions Company, the CCCC, which is a blacklisted Chinese state-owned enterprise, which is building one of the important bridges over the Panama Canal. The U.S. sought to head off a Chinese company from building that bridge and ultimately couldn't get any U.S. construction companies interested. There's really a plethora of Chinese infrastructure projects in and around the canal zone that are going up.
This is not to mention the digital stuff that Huawei and ZTE [are doing] in order to provide this port infrastructure with smart technology. That has worried U.S. policymakers of back doors and ways in which China can lock certain countries into international standards that accord more with Chinese state-owned enterprises than with Western companies.
Petersen: There's concern about what China may or may not be doing in the canal. And Chinese hacking, cyberattacks, including some recent reports that they've also targeted U.S. infrastructure, naturally arouses suspicions about what may or may not be going on with Chinese activity in the canal, given its strategic importance to us. I think from a foreign policy strategic point of view, you need to keep an eye on this. It's not just what they're doing — it's more about what they might be doing. But the overall pattern that we're seeing in US-Chinese relations do raise concern.
If you take a look at what they're doing across Latin America, China is now Latin America's number one trading partner. Between 2000 and 2020, their trade with Latin America went up 26-fold to $315 billion or something. I think the projection from Southcom is that in another 10 years, it could reach $700 billion. They've also got the Belt and Road activity going on. So they're very active. A lot of it is legitimate diplomatic and trade activity. It's not necessarily military or that sort of thing. But Southcom and the U.S. Defense Establishment worry about Chinese influence and their ability to influence governments within the region.
What's Beyond the Rhetoric?
Duddy: The concern I have is that even rhetoric of this sort tends to activate and to mobilize opponents, critics of the United States around the region and in other parts of the world. The U.S. operated the canal for 90 years, and we operated it fairly effectively, efficiently. Panama has largely done the same. Our treaties, as I note, transferred the canal but preserved expedited access for the U.S. military and also assured that we would be treated fairly. The arguments to the point that we are being treated prejudicially, I would need to see more evidence of.
I have not seen any evidence that the current managers of the canal have abrogated their treaty obligations, either for commercial traffic or for military traffic. And insofar as the complaints that we may be getting overcharged, don't have any particular, I don't see any proof positive that that is the case. I've heard one former American official who served in Panama in a senior position insist that to his knowledge that that is not the case. One of the curious aspects of this debate is that most container freight moving to and from the United States through the Panama Canal is not carried on American flag vessels. That would not likely change if the sovereignty of the canal changed.
Berg: I think Panama understands that its top partner in almost every sense is the United States. It's still its top trade partner. Most students in Panama, if they seek to study outside of Panama, go to the United States. Much of Panamanian society is oriented towards its north, towards the United States. It would be difficult for China to completely reorient Panama away from the United States.
I would say we're also the most important security partner for Panama as well. And [Panama’s] current president, José Raúl Molino, has signaled that he wants to be a very close partner of Washington on migration issues, which is another reason why we need the Panamanians. They stand at a critical choke point for migrants coming to the southern border.
That said, their reaction has been more or less what we should have expected from them regarding the Panama Canal. They have reiterated that this is Panamanian sovereignty, that no negotiations will happen about the sovereignty of the canal. They've also reiterated their commitment to ensuring that the canal is a neutral space for all countries to be able to transit interoceanically. Beyond that, they haven't said much because I think that they are looking to solve this situation once President Trump takes office, hopefully in a diplomatic way. That might entail some kind of negotiations about reducing Chinese influence around the canal, but I highly doubt it will result in the U.S. taking back the canal.
Petersen: I really don't know what led Trump to make the remarks that he did. I will say that I think one impact of his comments is probably to caution both Panama and China not to do anything that could be interpreted as detrimental to U.S. interests in the region. Call it a warning flag or whatnot — this is actually called diplomacy. You signal your intent, you raise issues, you put down markers, and then you see what happens after that.
We're still the preeminent power in that region. Anybody that wants to move closer to China or Russia, take a look at Cuba and Venezuela. They're going to have a harder time. And the history of U.S.-Latin American relations is not a very happy story. We always say good things, good-neighbor policy, and that sort of thing [but] our follow through on that has been something less than sparkling over our history. And indeed, in many cases has been seen as detrimental to Latin American interests by Latin Americans. So we've got a lot of diplomacy, a lot of work to do down there to maintain U.S. influence and contain whatever ambitions China may have beyond commercial.
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Likely next steps by the new Administration
Berg: The Western Hemisphere is going to be an important sphere of influence for Trump in his second-term foreign policy. Within that, the Panama Canal is a top issue, or maybe the number two issue behind bringing Greenland closer to the United States as well. So, I do think that we are going to hear more about the Panama Canal. This is not over.
The only thing that I would caution is, I do think President Molino in Panama is a very pro-American president. He has positioned himself to be a strong partner of Washington, and I think we should probe that for all that it's worth. We're going to need him on a number of other issues. I do sincerely hope that whatever kind of negotiations ensue about curtailing elements of Chinese influence around the canal, that it doesn't rupture the relationship, that we keep a strong strategic relationship with Panama, as we've always had, in order to pursue other objectives with them as well.
Duddy: Bottom line, what the United States wants is fair treatment for trade through the canal. I believe that the Panamanians would argue that we already have that. And then, expedited or preferential treatment for our military vessels when they need, as they do frequently, to move back and forth.
I'm not sure what we can do other than making sure that the government of Panama, the government of China and others all understand what our continuing interest in the canal is and what authorities, the treaties which [are that] transferred the canal, established or codified for the United States. I would note that in that context, The Treaty of Permanent Neutrality does not give the United States authority to intervene in the affairs of the Republic of Panama — only to defend the canal. That is an important distinction.
Petersen: I guess the next move involves Panama and China. We'll see what happens. We've got a new national security team coming in. I don't know how far up their list of things that they need to address immediately this particular issue is. Certainly the situation in Ukraine, situation in the Middle East, reviving and building up NATO, terrorism, the border [are on the list.] This is one of many, many issues. So, we'll have to see where it goes. But I would put it this way: Trump's put down a marker. Now let's see what happens next.
Cipher Brief Managing Editor Tom Nagorski and Writer Ethan Masucol contributed to this report
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