In a bold and controversial move, US President-elect Donald Trump has demanded that Panama return control of the Panama Canal to the United States. Trump claims the transit fees charged by Panama are “exorbitant” and constitute a “complete rip-off” of the US. The statements have sent shockwaves through the international community and raised concerns about potential escalations in US-China tensions in the region.
A Vital Global Trade Artery
The Panama Canal is one of the most critical waterways for global trade, connecting the Atlantic and Pacific Oceans. Each year, nearly 14,000 ships traverse the 51-mile canal, carrying over 400 million tons of cargo. The US is the canal’s biggest customer, accounting for about 75% of the traffic, while China is the second largest user.
The fees being charged by Panama are ridiculous. This complete ‘rip-off’ of our country will immediately stop.
– Donald Trump, US President-elect
Rising Transit Fees Amid Droughts
The Panama Canal Authority sets the transit fees, which have risen sharply in recent years due to droughts exacerbated by climate change. With critical reservoirs drying up, the canal’s capacity has been reduced, leading to congestion and delays. Some ships have paid up to $4 million to jump the queue, while others have waited weeks for passage.
- 2023 drought limited crossings to 22 ships per day, down from 36
- Transits fell nearly 30% in the year to September 2024
- Fees set to increase further on January 1, 2025
Panama Asserts Sovereignty, Rejects US Demands
Panamanian President José Raúl Mulino has unequivocally rejected Trump’s demands, emphasizing that Panama has full control and sovereignty over the canal. The US handover of the canal to Panama in 1999 was the culmination of treaties signed by President Jimmy Carter in 1977, following tensions and a US invasion to oust Manuel Noriega a decade earlier.
Every square metre of the Panama Canal and its adjacent zones is part of Panama, and it will continue to be.
– José Raúl Mulino, President of Panama
Geopolitical Tensions and Chinese Influence
Trump also warned about the canal falling into the “wrong hands,” alluding to growing Chinese influence in the region. While a Hong Kong-based company controls ports on both ends of the canal, President Mulino has asserted that Panama maintains full control over the waterway itself. The escalating tensions between the US and China have raised concerns over potential disruptions to critical trade routes.
An Uncertain Path Forward
As President-elect Trump prepares to take office, his hardline stance on the Panama Canal has injected uncertainty into the future of global maritime trade. While Panama remains resolute in its sovereignty over the canal, the prospects of a protracted dispute with the US could have far-reaching economic and geopolitical implications. The international community will be watching closely as this high-stakes drama unfolds.
