Can Trump Take the Panama Canal Back?

The Panama Canal, one of the most strategically significant waterways in the world, has once again become a focal point of international controversy. Former President Donald Trump has raised alarms about Panama’s increasing alignment with China, accusing the Panamanian government of violating the 1977 Canal Treaty. Trump’s stance has reignited debates over U.S. involvement in the canal, its economic contributions to Panama, and the geopolitical risks posed by Chinese influence. As Trump declared on Truth Social, “We’re being ripped off at the Panama Canal like we’re being ripped off everywhere else.”

A Brief History of the Panama Canal The Panama Canal, often considered one of the greatest engineering marvels in history, was constructed by the United States between 1904 and 1914. At a cost of $375 million (equivalent to over $15 billion today), it was the most expensive construction project of its time. Thousands of workers lost their lives during its construction, battling harsh working conditions and tropical diseases.

The canal revolutionized global trade by creating a direct route between the Atlantic and Pacific Oceans, saving ships thousands of miles and weeks of travel time. However, control of the canal became a point of contention between the United States and Panama throughout the 20th century. In 1977, President Jimmy Carter signed the Torrijos-Carter Treaties, which guaranteed the canal’s transfer to Panama by December 31, 1999. These treaties also promised the permanent neutrality of the canal and gave the U.S. the right to defend it against any threat.

During a speech at AmericaFest, Trump emphasized the significance of these treaties, stating, “We will never allow the Panama Canal to fall into the wrong hands.”

Economic Impact of the Panama Canal on Panama The Panama Canal remains the cornerstone of Panama’s economy, contributing approximately 7.7% to the country’s GDP. In 2023 alone, it generated $2.55 billion in revenue, representing 23.6% of the Panamanian government’s annual income. Over the years, the canal has contributed a total of $25.76 billion in direct payments to Panama’s National Treasury.

Beyond its financial contributions, the canal supports nearly 55,000 jobs, accounting for 2.9% of total employment in the country. Its indirect impact on logistics, trade, and related industries makes it a vital economic engine for Panama.

In a statement celebrating the canal’s 25th anniversary under Panamanian control, President José Raúl Mulino highlighted its importance: “The Panama Canal continues to be a profitable public company, generating substantial earnings that are ultimately transferred to the National Government for the sake of our nation.”

Panama’s Investment in the Canal Since gaining control in 1999, Panama has invested billions into modernizing and expanding the canal. The most significant investment was the $5.25 billion expansion project, completed in 2016, which allowed larger Neopanamax vessels to pass through the waterway. This upgrade doubled the canal’s capacity and significantly boosted maritime trade efficiency.

However, Panama now faces challenges, including water scarcity, operational costs, and competition from alternative routes. The ongoing water crisis has forced authorities to reduce daily transits and increase toll fees, a decision that has sparked criticism from shipping companies and political figures like Trump.

The Growing Chinese Influence Trump’s primary concern centers around China’s growing economic and strategic influence in Panama. In 1997, Panama outsourced the management of its two entry ports—Cristóbal on the Atlantic and Balboa on the Pacific—to Hutchison Ports PPC, a Hong Kong-based company. At the time, Congress determined the deal posed no threat to U.S. interests because Hong Kong was still under British control.

However, after Hong Kong returned to Chinese rule in 1997, concerns about Beijing’s influence grew. By 2022, Chinese investments in Panama exceeded $2.5 billion, and over 40 Chinese companies now operate in the Canal Zone. Trump has argued that these partnerships violate the Torrijos-Carter Treaties, which required Panama to ensure neutrality and nondiscriminatory access to the canal.

Trump warned at AmericaFest: “With Chinese interests controlling the entry ports on both sides of the canal, disabling the waterway would be child’s play for our adversaries in Beijing—and disastrous for America’s economy and safety.”

Trump’s Warning and the Treaty Debate Trump has argued that Panama’s concessions to Chinese companies represent a breach of the 1977 treaties. He claims that rising toll fees disproportionately target American shipping companies, undermining the canal’s neutrality.

In a fiery Truth Social post, Trump declared, “If the principles, both moral and legal, of this magnanimous gesture of giving are not followed, then we will demand that the Panama Canal be returned to the United States of America, in full, quickly, and without question.”

While legal experts debate whether the U.S. has the authority to reclaim control under the treaties, Trump’s supporters believe the national security provisions give him the moral and legal justification to act.

What the Experts Say Most international law experts argue that the treaties do not explicitly grant the U.S. the right to retake the canal. They maintain that Panama remains the legitimate operator of the waterway and that China’s role, while concerning, does not violate the treaties.

However, Trump’s supporters argue that Trump’s approach is necessary to counter China’s growing influence and prevent potential disruptions to global trade.

Trump’s stance positions him as a defender of American economic and security interests. His supporters see him as someone willing to challenge both Panama and China to ensure that the canal remains neutral and accessible to all nations.

Historically, the U.S. has not hesitated to intervene in Panama when its interests were threatened. In 1989, American forces invaded Panama to remove dictator Manuel Noriega, who had jeopardized U.S. security and the canal’s neutrality.

ACZ Editor: Trump’s style is to set a goal and then set an intolerable negotiating position. Panama’s negotiating position at this point is already intolerable, i.e. China in key positions of control. Trump may not end up owning the canal, but China will almost certainly be kicked out.

After all, the Canal was a gift, an incredibly generous one given that it has contributed over $25 Billion to the Panamanian economy. They had one job – to keep it out of enemy hands. As Trump said, “We’ll see about that.”