Panama Canal Politics and Implications of Donald Trump's Threats

The contentious history and precarious present of Central America's vital shipping artery.

The Panama Canal stands as a monument to American engineering brilliance and geopolitical importance, a crucial conduit for global trade since its completion in 1914. Initially hailed as an unparalleled achievement in infrastructure, the canal effectively connected the Atlantic and Pacific Oceans, enabling the swift and efficient movement of maritime traffic. The first vessel to navigate this unprecedented waterway, the SS Ancon, epitomized the triumph of the United States in reshaping global maritime commerce. As U.S. diplomat John Barrett aptly observed, the flawless operation of the canal quickly imbued it with an air of inevitability, rendering its existence seemingly preordained.

Over a century later, the Panama Canal remains an indispensable artery, facilitating the passage of more than 12,000 ships annually—underscoring its enduring significance in global commerce and the economic integration of the Western Hemisphere.

Yet, what once appeared to be a harmonious relationship between the United States and the Panama Canal has grown increasingly fraught with tension, particularly under the rhetoric of former U.S. President Donald Trump. In his inaugural address, Trump condemned the 1977 Panama Canal Treaties, which culminated in the transfer of the canal’s sovereignty to Panama in 1999, labeling the decision as "foolish" and accusing Panama of mishandling the canal in ways that harm American interests. Such statements suggest that Trump perceives the canal not merely as a crucial geopolitical asset but as a symbol of perceived American decline—an interpretation that stands in stark contrast to the historical context of the treaty negotiations and the current management of the canal under Panama’s stewardship.

The United States’ involvement in the construction of the Panama Canal dates back to the late 19th century, with President Theodore Roosevelt’s pivotal intervention in Panama's secession from Colombia. The resulting 1903 Hay-Bunau-Varilla Treaty granted the United States sovereignty over the Canal Zone, a ten-mile-wide strip of land critical to the construction of the canal. Although the canal’s completion in 1914 represented an extraordinary engineering feat, it came at a tremendous human cost, with thousands of laborers—many brought from Caribbean colonies—falling victim to disease and accidents. Nevertheless, the canal’s completion marked the dawn of a new era in global trade.

However, the 20th century saw mounting resentment among Panamanians, who viewed the prolonged U.S. presence in the Canal Zone as emblematic of imperial exploitation. Tensions reached a boiling point in 1964, when violent clashes erupted between Panamanian civilians and U.S. Marines. This unrest catalyzed renewed diplomatic efforts that culminated in the 1977 Panama Canal Treaties, negotiated under the aegis of President Jimmy Carter. These treaties charted a course for Panama to assume full control of the canal by the end of the century, while the United States retained operational oversight until 1999. The Panama Canal Authority, an autonomous entity established to oversee canal operations, continues to manage the waterway, having invested significantly in modernizing its infrastructure to accommodate larger vessels.

In evaluating the current significance of the Panama Canal, it is evident that the waterway remains a critical lifeline for global trade. The canal accounts for approximately 5% of global maritime commerce, serving as an essential link between the Atlantic and Pacific Oceans. Notably, it plays a pivotal role in U.S. trade, with nearly 40% of American container traffic passing through its locks annually. The canal is also indispensable to the swift movement of goods from the U.S. East Coast to Asia and serves as a vital connection between South American economies and Asian markets. Particularly crucial to the energy sector, the canal facilitates the transport of crude oil, liquefied natural gas (LNG), and liquefied petroleum gas (LPG) between the Americas and Asia.

However, the increasing strain on the canal’s capacity, exacerbated by environmental challenges such as the El Niño phenomenon, has exposed its vulnerabilities. For instance, the droughts of 2023-2024 caused water levels in Gatun Lake to drop significantly, leading to shipping delays and rising operational costs. These challenges underscore the critical need for sustained investment to maintain the canal’s efficiency, which remains vital to both global trade and the U.S. energy sector.

Despite Panama’s effective stewardship of the canal, Trump’s criticisms echo long-standing grievances, particularly his contention that the 1977 treaties constituted a grievous error and that Panama has failed to honor its obligations to the United States. This rhetoric aligns with a broader populist critique of international agreements perceived as detrimental to American interests.

Trump's personal history with Panama marked by business disputes and legal entanglements involving the Trump Organization adds complexity to his position. His remarks during the 2003 Miss Universe competition in Panama City indicate a longstanding skepticism toward Panama’s management of the waterway. Additionally, his 2018 confrontation with Panamanian authorities over a hotel dispute highlights the intersection of his business interests with his political rhetoric regarding U.S.-Panama relations.

A recent Senate hearing raised questions about potential measures to exert leverage over the Panama Canal, following Trump’s vow to "take back" the waterway during his inaugural address. However, international law experts insist that such a move would violate the terms of the 1977 treaty that transferred sovereignty to Panama.

Eugene Kontorovich, a senior research fellow at the conservative Heritage Foundation, testified before the Senate Commerce Committee, asserting that while the U.S. retains the right to withdraw from the treaty, such a decision would not automatically restore American control over the canal. Kontorovich emphasized that, although the United States retains mechanisms to ensure the canal’s neutrality, reclaiming territorial control would not constitute a viable solution.

The hearing also delved into concerns regarding Chinese influence in canal operations, with Chinese-backed companies managing terminals on both sides of the waterway. This raised questions about potential violations of the treaty’s neutrality provisions. In response to inquiries from Senator Ted Cruz (R-Texas), Kontorovich acknowledged the possibility of employing armed force to enforce the neutrality provisions, though he cautioned that such measures should only be pursued after all diplomatic and alternative avenues have been exhausted.

Further discussions focused on the Panama Canal Authority’s practice of auctioning canal slots during periods of water scarcity, as seen during the 2023-2024 droughts. Federal Maritime Commission board member Dan Maffei expressed concerns about the elevated transit fees during the crisis, warning of potential negative repercussions for U.S. foreign trade. Maffei also questioned the excessive attention placed on Chinese influence, noting that Chinese-backed companies manage ports worldwide, including strategic locations such as the Suez Canal and the Singapore Straits.

The Senate hearing underscored the need for a comprehensive national strategy to safeguard U.S. economic and maritime interests while acknowledging the global nature of contemporary maritime trade and the complexities of international diplomacy.

Ultimately, Trump’s rhetoric on the Panama Canal reflects a broader ideological framework that interprets international agreements through the lens of zero-sum competition, where any perceived loss of American control is viewed as a diminution of national power. However, such perspectives fail to consider the intricate geopolitical and historical factors that led to the canal’s transfer, as well as the substantial investments made by Panama in modernizing and maintaining its operations.

As the canal faces new challenges—particularly in terms of capacity and environmental pressures—the discourse surrounding its ownership and governance is likely to evolve. Nevertheless, it is essential to recognize that the canal’s continued importance to global trade and energy markets hinges upon international cooperation, rather than confrontation, between nations. While Trump’s criticisms may resonate with certain political constituencies, they risk oversimplifying the complexities of global interdependence and the evolving dynamics of international commerce.


Anwar A. Khan is a freedom
fighter who writes on politics
and international issues.