Adverse Consequences of US Threats to Retake the Panama Canal

Introduction

President Donald Trump’s comments threatening to resume United States control of the Panama Canal, reiterated in his inaugural address on Jan. 20, could have significant political consequences for U.S. influence in the region. [1] 

The dangers go well beyond assertions that Panama is charging unreasonable tolls for ships transiting the Canal, even though there appears to be a valid basis for Trump’s assertions that rates are excessive, as discussed more fully below. [2] Similarly, Hong Kong/Chinese port management companies that have been operating in Panama for almost 30 years are not currently a threat to the neutrality of the canal, although an increased Chinese presence could be considered a risk in the future. The Trump administration’s concerns also reflect the fact that some 70% of canal traffic consists of shipments to or from the United States as well as an awareness of significant Chinese influence in the areas near the canal.

This threat, like the reiteration of Trump’s desire to take over Greenland, seems to be anything but a joke, designed in significant part to make clear that “decades of U.S. commerce financing China’s growth and strategic footprint in the Americas is over,” according to a senior Trump official. [3]

Whether a canal takeover or other form of intervention is ultimately carried out or not, Trump's aggressive “America First” philosophy is reminding countries across the Western Hemisphere of past U.S. military incursions in Latin America and the Caribbean, including a brief invasion of Panama in 1989 to overthrow notorious military dictator and drug lord Manuel Noriega. [4] Still, regardless of what some might consider a desirable response to China’s growing presence in Central and South America, if the United States takes unilateral steps against Panama, the results are likely to be the opposite of what Trump intends. Such actions could backfire, giving China new opportunities to win friends and influence governments in South America and elsewhere. [5]

China’s recent efforts to displace U.S. influence in the region — including the new China-financed Peruvian Chancay container port, which could reshape China’s trade with Latin America — have received a boost from Trump’s recent threats to retake the canal, possibly through military force. [6] As of October 2022, China was already the largest trading partner with most South American nations although, at that time, the U.S. remained the largest overall trading partner for the hemisphere. [7] Nations such as Peru, with its new container port, and Brazil, with current construction of Chinese auto manufacturing facilities, are already moving closer to China and, by implication, further from such U.S.-friendly nations as Colombia. Colombia, Panama’s southern neighbor — expected to join China’s Belt and Road Initiative (BRI) in 2025 and considering membership in the BRICs bank — may view Trump’s threat against Panama as further justification for distancing itself from the United States. [8] Ultimately, anti-U.S. governments in Central and South America, as well as the Caribbean — including Nicaragua, Venezuela, Bolivia, and Cuba — may argue that U.S. interventionist risks in Latin America remain present, and that strengthening ties with China or Russia could be a more stable alternative.

The potential negative consequences for the United States are not difficult to envision. Panamanian President José Raúl Mulino’s immediate reaction to this threat to his country’s sovereignty — coming from one of the strongest U.S. allies in the hemisphere — was to denounce it in the strongest terms. At a minimum, pursuing the threat could risk Molino’s promised cooperation in closing the Darien Gap to undocumented immigrants journeying from South America toward the U.S. border, even though Molino has wisely asserted that the issues are separate and that interdicting immigrants at the Darien Gap is in both Panama's and the United States' interests. [9] 

Other potential risks include terrorist attacks on the canal if the U.S. invades, disrupting a vital shipping route, and further weakening the Organization of American States (OAS). Invading Panama would also risk punishing a small but staunch U.S. ally that uses the U.S. dollar as legal tender, supplies critical minerals like copper, combats illegal immigration, and contributes to a significant U.S trade surplus. [10]

The balance of this report is organized as follows:

• Part II: A brief history of the Panama Canal and U.S. involvement through Dec. 31, 1999, along with U.S. rights under the current Neutrality Treaty.
• Part III: Panamanian sovereignty post-1999 and the asserted U.S. right of intervention.
• Part IV: The rise of Chinese economic and political influence in the region, fueled by imports from Peru, Brazil, and Argentina.
• Part V: Risks to the U.S. from a potential conflict with Panama, including political fallout and canal closure.
• Part VI: Conclusions and policy recommendations given Trump’s invasion threats.

Part II. The United States and the Panama Canal

An earlier issue brief provides a more detailed history of U.S. construction and ongoing influence on the Panama Canal. [11] In summary, the United States took over the construction of a canal across Panama after French efforts failed due to engineering challenges and disease. The U.S. completed construction of the canal in 1914, a leading example of U.S. power and technological abilities at the time. The U.S. managed the completed canal under a 1914 treaty with no time limits, exercising sovereignty over the “Panama Canal Zone” — a 10-mile-wide slice of American territory bisecting the Republic of Panama — until the conclusion of the 1977 Panama Canal Treaty. That treaty replaced the 1914 treaty and provided for joint U.S.–Panamanian administration. It remained in effect until Dec. 31, 1999, when it was replaced by the “Neutrality Treaty.” [12]

The Carter administration’s push for the 1977 treaty was motivated by the challenges of defending the 1914 treaty under international law, amid widespread Cold War tensions, human rights concerns, and the reasonable threat of anti-American riots across Latin America. The decision was also affected, in part, by rising demonstrations in Panama against the U.S. presence, and by the realization that a canal dependent on locks for ship transit — with three sets of locks on both the Atlantic and Pacific sides — was highly vulnerable to terrorist attacks despite significant U.S. military presence then stationed in the Canal Zone. [13]

Part III. Panamanian Sovereignty, a US Right of Intervention, and Control Over Tolls

The Panama Canal Treaty of 1977, which ceded control of the canal to Panama after a 22-year transition period, was terminated on Dec. 31, 1999. The 1977 treaty notably contained language in Article IV.2 to the effect that the U.S. would retain the primary right and responsibility to defend the canal’s neutrality during the transition period only, in order to ensure its continued operation. Since Jan. 1, 2000, control over the canal has been governed by a separate Neutrality Treaty, which grants no similar explicit right of involvement to the United States government or the military. Under Article IV of this treaty, the U.S. and Panama jointly guarantee that the canal will remain “permanently neutral,” without defining “neutrality” more specifically. [14] Under such circumstances, even if Panama permitted such neutrality to be jeopardized by the Chinese or anyone else, the Neutrality Treaty provides no clear legal right to intervene under the treaty, and international law would provide no basis. It seems curious that, despite the U.S.-China trade war that began almost a decade ago, serious questions have not been raised earlier in the United States about Hong Kong/Chinese management of Panamanian port facilities.

The lack of an unequivocal provision in the Neutrality Treaty for U.S. involvement, excluded because of Panama’s unsurprising concerns over its sovereignty under the treaty, was of concern to many members of the Senate and stakeholders elsewhere in the United States, resulting in several efforts to provide an explicit basis for maintaining U.S. intervention rights. [15] The first such effort to retain U.S. intervention rights was a joint “Statement of Understanding” issued by President Jimmy Carter and Panamanian leader General Omar Torrijos regarding the responsibility of the two countries to maintain the canal’s neutrality, stating:

“each of the two countries shall, in accordance with their respective constitutional processes, defend the Canal against any threat to the regime of neutrality and consequently shall have the right to act against any aggression or threat directed against the Canal or against the peaceful transit of vessels through the Canal.

This does not mean [referring to the first paragraph] nor shall it be interpreted as a right of intervention of the United States in the internal affairs of Panama. Any United States action will be directed at ensuring that the Canal will remain open, secure and accessible and it shall never be directed against the territorial integrity or political independence of Panama.” [16]

Unsatisfied with this somewhat ambiguous language, the U.S. Senate added two unilateral statements (or “reservations”) to the Neutrality Treaty, effectively seeking to amend it:

“If the Canal is closed or its operations are interfered with the United States of America and the Republic of Panama shall each independently have the right to take such steps as it deems necessary in accordance with its constitutional processes including the use of military force in Panama, to reopen the Canal or to restore the operations of the Canal, as the case may be.” [17]

A month later, the predictable outcry from Panama led to a second Senate reservation:

“Pursuant to its adherence to the principle of non-intervention, any action taken by the United States of America in the exercise of its rights to assure that the Panama Canal shall remain open, neutral, secure and accessible, shall be only for the purpose of assuring that the Canal shall remain open, neutral, secure and accessible, and shall not have as its purpose or be interpreted as a right of intervention in the internal affairs of the Republic of Panama or interference with its political independence or sovereign territory.” [18]

Both reservations were accepted by the Panamanian government in 1978, meaning Panama cannot argue today that they reflect only the U.S. understanding, but the second reservation appears to provide some basis for Panama’s assertion that U.S. intervention rights under the treaty are limited. [19] Practically speaking, however, given Panama’s limited national defense capabilities and the unlikely scenario that it would fail to protect the canal’s neutrality, it seems clear that the U.S. would have little hesitation in resorting to military action to uphold its intervention rights, if necessary. That being said, the presence of Chinese or Hong Kong-controlled port operators in Panama — which have operated the facilities since 1996 — would appear to provide no legal or political basis for U.S. intervention, under either the U.S. reservations attached to the Neutrality Treaty or international law. [20]

Also, under Article XIII.1, pertaining to the transfer of sovereignty and control to Panama on Dec. 31, 1999, the treaty states that, “Panama shall assume total responsibility for the management, operation, and maintenance of the Panama Canal.” [21]

Panama Retains Control Over Tolls

Under the Neutrality Treaty that remains in force, Panama also has control over tolls. Still, significantly for purposes of this discussion, the Neutrality Treaty specifies in Article III(c) that, “Tolls and other charges for transit and ancillary services shall be just, reasonable, equitable and consistent with the principles of international law” — although no mechanism is provided in the treaty to resolve any differences over whether the tolls are “just, reasonable and equitable,” either by the U.S. and Panamanian governments or by the canal’s many stakeholders. [22]

Still, this “just, reasonable, equitable and consistent with the principles of international law” language provides at least some constraint on Panama’s discretion to raise tolls. Every major shipper and consumer, whether American, European, Chinese, or otherwise, has a legitimate interest in reasonable tolls and perhaps a potential right to question the auction system, whereby ships can improve their place in line by paying extra fees. In particular, the Jan. 1, 2025, toll increases for most vessel types seem excessive to some expert observers. These new tolls include a 200% increase in liquified natural gas (LNG) tariffs over the past three years; for cargo ships, general increases of 18–220% over several years; and for containers, a 12.5 % increase per twenty-foot equivalent units (TEUs) for loaded containers and 200% for empties.

As Jean-Paul Rodrigue, an expert on ocean shipping and supply chain management, observes, “From the US standpoint, these increases can be perceived as a disruptive and inflationary force, particularly for an administration that has made the commitment to curb inflation and place American interests at the forefront.” [23] The question of the extent to which canal toll increases could measurably raise overall U.S. inflation is well beyond the scope of this report, however.

Despite these observations, the evidence suggesting these new tolls are unreasonable remains inconclusive. As the president of Panama has noted, “They are established in public meetings by the Panama Canal Authority, and take into account market conditions, international competition, operating and maintenance costs.” [24]

It is important to note that efforts to install new dams and other facilities designed to conserve water supplies, probably essential for the longer-term viability of the canal, could cost billions of dollars. [25]

Regardless, many observers are more concerned with the Trump administration’s heavy-handed approach than with the issue of toll levels or Chinese influence itself. There would be no justifiable legal basis for the Trump administration to intervene in the operation of the canal, even if it could show that tolls are unreasonable. As noted above, legitimate questions have arisen since the 2023–24 water shortages and high demand led to significant toll increases, partly due to the limited number of alternative routes that are economically non-competitive. [26] Rather, the appropriate remedies would be bilateral negotiations, mediation, or third-party arbitration, depending on the willingness of the two parties involved to agree. [27]

Panama Has Proved a Competent Manager of the Canal

During the past 25 years, Panama has managed the canal, by all accounts, in a highly competent manner. [28] Panama also successfully supervised a $5 billion expansion of canal capacity completed in 2016. The U.S. played no significant role in that project, despite its obvious benefits to the United States. [29] The new locks allow wider, longer, and deeper container and other ships to transit the canal, permitting them to use this key supply chain route from Asia to major gulf and east coast ports such as Houston, Charleston, Savannah, and Newark. Individual container ship capacity increased significantly from 4,500 to 12,500 TEUs per ship. [30] The benefits for all stakeholders, despite the supply chain risks of larger ships, seem obvious.

Part IV. China’s Growing Economic Influence in Panama and Latin America

China has been a major investor in and trading partner with Latin America for decades, in addition to the multibillion-dollar Peruvian Chancay container port mentioned earlier. For example, in one of its earliest investments, China’s state-owned company Shougang Hierro purchased the Marcona iron ore mine and smelter in 1992, exporting the iron ore pellets back to Chinese steel mills. At the time it was believed to be the largest Chinese investment in Latin America. [31]

Another significant Latin American investment by China, discussed more fully elsewhere in this report, is in the area around the canal. [32] The principal Balboa and Cristobal container ports at the ends of the canal have been operated by Hutchinson Port Holdings, a Hong Kong corporate entity, since 1995. [33] Additionally, “in 2016, with a $900 million investment, the China-based Landbridge Group, acquired control of Margarita Island, Panama’s largest port on the Atlantic side and in the Colón Free Trade Zone, the largest free trade zone in the Western Hemisphere. The deal established the Panama-Colón Container Port (PCCP) as a deep-water port for megaships, and the construction and expansion was carried out by the China Communications Construction Company (CCCC).” [34]

Unproven Accusations Have Complicated the Matter

Trump has accused Panama, without any apparent justification, of permitting Chinese interests to operate the canal. However, none of these Chinese entities has any role in the operation of the canal or the parallel railway across the isthmus. Still, as Ryan C. Berg of the Center for Strategic and International Studies (CSIS) notes, CK Hutchinson Holdings, the company managing the ports of Balboa and Cristobal, “would likely have data on all ships coming through the Panama Canal, giving it a data advantage. China also has been using its shipping and maritime operations to gather foreign intelligence and conduct espionage.” [35]

Under these circumstances it is not surprising that some U.S. observers have expressed concern and that the Panamanian government has initiated an audit of Hutchinson Holdings. [36]

China’s Investments in Latin America Are Significant

Beyond Panama, one source estimates that Chinese foreign direct investment (FDI) in Latin America amounts to around $12 billion as of 2022. Perhaps more significantly, between 2005 and 2020, China’s Development Bank and Export-Import Bank together loaned approximately $137 billion to Latin American governments, often in exchange for oil or to fund energy and infrastructure projects. [37] As of May 2022, it was reported that seven Latin American countries participate in China’s Belt and Road Initiative (BRI), including Venezuela, Ecuador, Peru, Bolivia, Chile, Argentina, and Uruguay. [38]

This investment data excludes Chancay ($3.5 billion) and a BYD auto plant now under construction in Brazil. Brazil has become a major auto export market for China, with a BYD $1.1 million investment in a former Ford plant originally planned to go online in March 2005, and to be producing 300,000 cars a year within two years. [39] BYD’s progress in Brazil may be temporarily slowed by the discovery in late December that 163 Chinese laborers hired by a contractor were living in “slavery-like” conditions, as reported by Brazilian government authorities. [40]

In other words, Chinese FDI in Latin America is not a future concern; it has already arrived and can be expected to increase, particularly when incentivized by the United States’ economic and political actions over the past several decades.

Tepid US Support for Latin American Economies Has Eroded Ally Unity in the Region

In recent years, the United States has done little to demonstrate a strong interest in support of Latin American economies. Other than the USMCA, a trade agreement made by Mr. Trump in 2018 with Canada and Mexico, the most recent free trade agreements with Peru, Panama, and Central America/the Dominican Republic all were negotiated and went into force almost 15 years ago. [41]

The Biden administration’s Alliance for Economic Prosperity in the Americas (AEPA) appears to have produced relatively little of economic importance, in significant part because domestic U.S. politics precluded the offering of any increased access to the American market. [42] This all stands in stark contrast to China’s economic programs including, but not limited to, the BRI and other government-funded projects.

China’s Growing Presence in Latin America and the Caribbean

China has also become a much more important trading partner to Latin America and the Caribbean (LAC) than the United States. According to the World Economic Forum (WEF), trade between China and Latin America grew from 2000–20 from $12 billion to $315 billion, while U.S. Latin total trade between the U.S. and LAC stood at $758 billion in 2020. [43]

Among the greatest export success stories, China is a major importer of Latin American soybeans, principally from Brazil but also from Argentina. While historically the United States was the world’s largest soybean exporter, that changed in 2013 when Brazil became the leading exporter for the first time. Soybean exports from Brazil to China amounted to $38.9 billion in 2023, an increase of around 22% in comparison to the previous year. China is by far the leading destination for Brazilian soybean exports, accounting for nearly three-quarters of the export value. [44] Should Trump decide to increase U.S. import duties on goods from China beyond current levels, as has been threatened, China could well retaliate by shifting additional soy purchases from the U.S. to Brazil. [45]

Part V. Broader Indirect Risks of US-Panama Conflict

Although intangible, given the long history of U.S. military and economic interventions in Latin America, the impact on regional governments not directly affected by the threatened Panama Canal intervention — but concerned about similar actions in the future — should not be underestimated. According to one study:

“In the slightly less than a hundred years from 1898 to 1994, the U.S. government has intervened successfully to change governments in Latin America a total of at least 41 times. … These incidents involved the use of U.S. military forces, intelligence agents or local citizens employed by U.S. government agencies. In another 24 cases, the U.S. government played an indirect role.” [46]

Given the long history of such U.S. interference in the nations of Latin America, beginning with the Monroe Doctrine in 1823, it is likely very few of the 650 million inhabitants in Latin America over the age of 18, including Mexico and the Caribbean, would hear Trump’s Dec. 22, 2024, threats without recalling at least one such prior incursion. The inclusion of Greenland as a potential take-over target, and more fanciful assertions that Canada should be annexed as the 51st U. S. state, probably have not assuaged any regional concerns over Panama.

Panama’s Neighbors Express Their Support 

In the current situation, solidarity for Panama’s reaction to Trump’s threats was quickly expressed. Colombian President Gustavo Petro immediately supported Panama, commenting, “If the new US government wants to talk business, we will talk business, face to face, and for the benefit of our people, but dignity will never be negotiated.” This is on behalf of a country that split off from Colombia with the help of President Theodore Roosevelt in 1903. [47]

Mexican President Claudia Sheinbaum, who has her own issues with Trump, expressed her support for Panama’s government by reiterating that, “the Panama Canal belongs to the Panamanians.” [48]

Threat to Other US Initiatives

It seems obvious that Trump’s plans to deport tens of thousands of illegal immigrants and limit the number of new immigrants — not only from Mexico, but from many other Latin American nations — would likely be aided by a high level of cooperation from both home and transit countries, especially key transit countries like Mexico, Panama, and Colombia among others. Threats such as the present one are unlikely to be helpful in assuring full cooperation. Even countries that are not major sources of U.S. immigrants, such as Brazil and Peru, are unlikely to welcome threats that all LAC countries realize could be directed at them in the future for real or imagined slights.

While the new administration likely attaches little importance to the Organization of American States (OAS), it can reasonably be assumed that a unanimous or near unanimous OAS may castigate the U.S. for threatened violations of OAS Charter Articles 19 (non-intervention) and 20 (prohibiting economic coercion). [49] Eventually, the U.N. General Assembly would likely pass a similar resolution identifying a violation of Article 2 of the U.N. Charter. [50]

A less likely, but potentially more substantive, threat to the global trading system would occur only if significant numbers of Panama Canal users decided, because of security concerns, to alter shipping routes due to the threats and fear of actual closure. The risks of the extra time and costs experienced for vessels, shippers, and ultimately consumers may seem low at present, but should such an unlikely event happen, the results would be catastrophic, whether caused by armed conflict, domestic terrorism, or both. This is particularly true given that one of the alternative routes, via the Red Sea and Suez Canal, is currently being avoided by most vessels because of attacks on shipping by Houthi rebels. [51]

Some older readers may recall the 1965 conflict between British and French forces and Egyptian dictator Gamel Adbel Nasser, which resulted in military actions that closed the Suez Canal for months. [52] While this comparison may seem distant, it is worth noting that, due to the Suez Canal’s sea-level design, it is effectively more difficult to block — doing so typically requires sinking ships, as Nasser seemed to have recognized when the canal was owned and controlled by British and French commercial interests. While the Panamanian government would not sabotage its own canal, there are concerns that terrorist groups, either from Panama or elsewhere, might target the canal. Some observers worry that a few strategically placed explosives could disable a series of locks for days or weeks, particularly in light of recent tensions. [53]

VI. Conclusion

As is often the case with Trump, it is difficult to distinguish between seemingly non-serious threats meant to pressure negotiations and those signaling imminent action. Notably, prior to his January 2025 inauguration, Trump issued multiple threats (subject to modification or revision) to raise tariffs by 10–20% on every U.S. trading partner. China faces potential new tariffs of 10% or 60%, while Mexico and Canada could see new 25% tariffs unless they, in Trump’s view, take adequate steps to curb illegal immigration and fentanyl. The BRICS nations have been threatened with 100% tariffs if they develop a reserve currency to challenge the dollar. Mexico also faces 100% tariffs on autos, and the EU could face unspecified tariff increases if it does not buy more U.S. natural gas. [54]

While these actions could have significant negative effects on the global and U.S. economies, including businesses and consumers, few tariffs — whether temporary or otherwise — would likely have the equivalent longstanding adverse political and economic impact on U.S. relations with Latin America as an intervention in Panama or a heightened political rivalry with China. An overly blunt approach to the allegedly excessive tolls and undue Chinese influence allegations, with not so veiled threats to retake control of the canal from Panama, could cause damage even if not carried out. The indirect impact on U.S. interests, particularly in the efforts to counter China in the region, may already be significant due to the manner in which the threat has been lodged. What, some may ask, is the difference between China — which claims Taiwan is a breakaway territory of China — and the U.S., if the U.S. follows similar “wolf warrior” diplomacy, and demands that the Canal Zone once again be U.S. territory, as it was from 1914 to 2000? [55]

Policy Recommendations

Regardless of what steps if any are taken next, it would be prudent for the Trump administration to tone down its rhetoric, unless a military intervention in Panama is seriously being contemplated. The United States appears to have arguable concerns over rising toll levels, but the most effective means to address this would either be bilateral negotiations or some sort of independent expert analysis or third-party proceeding. This approach could also provide an opportunity to formally raise other potential issues of concern, such as any additional future involvement by Chinese or Hong Kong interests in or around the canal that would call into question Panama’s obligations under the Neutrality Treaty.

Creating a crisis in Panama and Latin America through threats of economic or military intervention, in the absence of any real threat to the canal’s neutrality; adding to uncertainties about ocean shipping routes; and giving China a broader opportunity to increase its influence in Latin America are all actions that do not serve the United States’ national interest — even if they were to ultimately result in lower canal tolls. Hopefully, Trump will reconsider this New Year’s gift to China, Russia, and other nations opposed to U.S. interests. One cause for guarded optimism is the announcement that the recently confirmed Secretary of State Marco Rubio, with his decades of experience in Inter-American affairs, plans to visit Panama (and other Central American nations) in early February 2025. It can be hoped that he will be able to begin a negotiation that will ultimately result in resolving the serious disagreements between the United States and Panama over canal tolls and Chinese influence. [56] Rubio’s visit also presents an opportunity for both countries to reiterate and strengthen their cooperation to interdict migrants who see crossing Panama’s Darien Gap jungle as a route to the United States.

Notes

[1] Santiago Pérez et al., “Trump Threatens to Take Control of Panama Canal, Greenland,” December 22, 2024, Wall Street Journal, https://www.wsj.com/world/americas/trump-threatens-to-take-control-of-panama-canal-staple-of-global-economy-fdb3ef37; Catherine Lucey, “Key Themes From Trump’s Inauguration Speech,” January 20, 2025, Wall Street Journal, https://www.wsj.com/livecoverage/trump-inauguration-president-2025/card/key-themes-from-trump-s-inauguration-speech-YZFc1wjkhzGJzXjNcDky.

[2] Peter Eavis, “Why the Panama Canal Didn’t Lose Money When Ship Crossings Fell,” March 21, 2024, New York Times, https://www.nytimes.com/2024/03/21/business/panama-canal-water-revenue.html.

[3] Karen DeYoung, “Trump’s Panama Canal Threats Designed to Scuttle China Influence,” December 24, 2024, Washington Post, https://www.washingtonpost.com/national-security/2024/12/24/trump-panama-canal-threat-china/.

[4] “The U.S. Invades Panama,” History, https://www.history.com/this-day-in-history/the-u-s-invades-panama.

[5] Will Freeman, “A New Monroe Doctrine Is Unlikely to Work for the US in South America,” January 2, 2024, Financial Times, https://www.ft.com/content/d2e9255d-21e2-48a8-8c13-01a5899559e2.

[6] “Xi Has a Plan for Retaliating Against Trump’s Gamesmanship,” January 4, 2025, Financial Times,  https://www.ft.com/content/ca79e423-7c0f-4883-a295-6fe1c73a2819.

[7] “China Regional Snapshot: South America, “ October 22, 2022, House Foreign Affairs Committee,  https://foreignaffairs.house.gov/china-regional-snapshot-south-america/.

[8] Freeman; “BRICS” refers to the New Development Bank, a multilateral development bank established by Brazil, Russia, India, China, and South Africa. https://www.ndb.int/about-ndb/.

[9] Pérez, “Inside the Plan to Halt U.S.-Bound Migrants at the Treacherous Darién Gap,” December 25, 2024, Wall Street Journal, https://www.wsj.com/world/americas/trump-immigration-policy-panama-darien-gap-05c2861e.

[10] Panama recorded an $11.6 million surplus on total trade of $17.5 million. However, its goods exports to the U.S., $523 million, are relatively small from an economic viewpoint (“Panama,” Office of the U.S. Trade Representative, https://ustr.gov/countries-regions/western-hemisphere/panama). See also “Panama – Country Commercial Guide,” April 4, 2023, International Trade Administration, https://www.trade.gov/country-commercial-guides/panama-market-overview.

[11] David A. Gantz, “Supply Chain Alternatives for Ocean Shipping If Climate Change-driven Water Shortages Persist at the Panama Canal,” October 2, 2023, Baker Institute for Public Policy,  https://www.bakerinstitute.org/research/supply-chain-alternatives-ocean-shipping-if-climate-change-driven-water-shortages-persist. For a comprehensive analysis, see David McCullough, The Path Between the Seas: The Creation of the Panama Canal, 1870–1914 (Simon & Shuster, 2004).

[12] “Panama Canal Treaty,” Congress.gov, https://www.congress.gov/treaty-document/95th-congress/14/A/document-text; Peter Baker, “Carter’s Panama Canal Treaties Symbolize How Much Washington Has Changed,” January 2, 2025, New York Times, https://www.nytimes.com/2025/01/02/us/politics/carter-panama-canal.html.

[13] “The Panama Canal and the Torrijos-Carter Treaties,” Office of the Historian,  https://history.state.gov/milestones/1977-1980/panama-canal.

[14] “Panama Canal Treaty of 1977,” United States Department of State, https://2001-2009.state.gov/p/wha/rlnks/11936.htm.

[15] Harold G. Maier, “The Right to Defend the Panama Canal,” Georgia Journal of International and Comparative Law 217 (1983): 217–24,  https://digitalcommons.law.uga.edu/cgi/viewcontent.cgi?article=1856&context=gjicl.

[16] “Joint Statement of Understanding Issued Following a Meeting Between the President and Brigadier General Omar Torrijos Herrera of Panama on the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal,” The American Presidency Project, October 14, 1977, https://www.presidency.ucsb.edu/documents/joint-statement-understanding-issued-following-meeting-between-the-president-and-brigadier; Maier, 219–20.

[17] Maier, 222.

[18] Maier, 223.

[19] Email exchange between a State Department lawyer who participated in the negotiations and the U.S. Senate ratification process and the author, January 6, 2025. His recollection was that the first reservation applied to the Neutrality Treaty while the second, corrective one applied to the now expired 1977 treaty.

[20] U.S Department of State archive, undated, https://1997-2001.state.gov/regions/wha/panama/991206_faqs.html. 

[21] “Panama Canal Treaty of 1977.”

[22] “Panama Canal Treaty of 1977.”

[23] Jean-Paul Rodrigue, “The Recent Statement Made by President Trump Concerning the #Panama #Canal Has Predictably Created Some Controversy,” LinkedIn, https://www.linkedin.com/posts/jean-paul-rodrigue-30780511_panama-canal-tolls-activity-7277396431978520578-EFsg/

[24] Lisa Friedman, “Trump Wants U.S. Control of the Panama Canal. Here Are 3 Things to Know,” December 26, 2024, New York Times, https://www.nytimes.com/2024/12/26/us/politics/trump-panama-canal.html.

[25] A Panamanian government estimate suggests that damming the Indio River will require an investment of $1.6 billion (“New Reservoir Planned to Secure Water for Panama Canal,” July 8, 2024, Tico Times,  https://ticotimes.net/2024/07/08/new-reservoir-planned-to-secure-water-for-panama-canal).

[26] Eavis.

[27] Among the options for third party settlement would be utilization of Chapter 20 of the state-to-state dispute settlement procedures of the 2007 United States-Panama Trade Promotion Agreement (“U.S.- Panama Trade Promotion Agreement,” Office of the United States Trade Representative, https://ustr.gov/trade-agreements/free-trade-agreements/panama-tpa/final-text). While Chapter 20 applies only to disputes under the FTA, in the unlikely event that both Parties were to agree, they could use the Chapter 20 mechanism and procedures as a forum for resolving the dispute. It includes, inter alia, provisions for the appointment of experts to advise the panel on technical or legal issues under Article 20.11, as well as mechanisms for consultation, conciliation, and mediation in Articles 20.4 and 20.5. Canada and the United States used the similar NAFTA mechanism to resolve a dispute over the interpretation of a 1996 Softwood Lumber Agreement that was not part of NAFTA, in 1988–99.

[28] Susan Gilbert, “Panama Canal: Troubled History, Astounding Turnaround,” December 20, 2010, Harvard Business School, https://www.library.hbs.edu/working-knowledge/panama-canal-troubled-history-astounding-turnaround.

[29] Kirwa, “The Panama Canal Expansion: Enhancing Global Maritime Connectivity and Trade Efficiency,” June 19, 2024, Construction Review,  https://constructionreviewonline.com/commentary/the-panama-canal-expansion-enhancing-global-maritime-connectivity-and-trade-efficiency/.

[30] Betty Armstrong, “Not Just Another Lock: Panama Canal Expansion Changes Global Shipping Industry,” Diversity Global, https://diversityglobal.com/web/Article.aspx?id=Not-Just-Another-Lock-Panama-Canal-Expansion-Changes-Global-Shipping-Industry-4723.

[31] Jacob Kessler, “An Embattled Chinese Mine in Peru Faces Its Latest Challenge,” May 31, 2023, The China Project, https://thechinaproject.com/2023/05/31/an-embattled-chinese-mine-in-peru-faces-its-latest-challenge/.

[32] Friedman, “Trump Picks Kevin Marino Cabrera for Ambassador to Panama,” December 25, 2024, New York Times, https://www.nytimes.com/2024/12/25/us/politics/panama-ambassador-cabrera-trump.html.

[33] “National Port System,” Georgia Tech Panama Logistics Innovation and Research Center, https://logistics.gatech.pa/en/logistics-platform/logistics-assets/seaports/national-port-system/.

[34] Daniel F. Runde and Amy Doring, “Key Decision Point Coming for the Panama Canal,” May 21, 2021, Center for Strategic and International Studies, https://www.csis.org/analysis/key-decision-point-coming-panama-canal.

[35] Friedman, “Trump Wants U.S. Control.”

[36] Christine Murray and Chan Ho-Him, "Panama Begins Audit of Hong Kong Company in Nod to Donald Trump," January 20, 2025, Financial Times, https://www.ft.com/content/da60bd73-db10-49eb-81fd-270308dbe9c0.

[37] Diana Roy, “China’s Growing Influence in Latin America,” January 10, 2025, Council on Foreign Relations, https://www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri.

[38] “China Regional Snapshot: South America,” House Committee on Foreign Affairs, last modified October 25, 2022, https://foreignaffairs.house.gov/china-regional-snapshot-south-america/.

[39] Leonardo Lara, “Chinese EVs Clog Up Brazil Ports With New Tariffs Cooling Growth,” December 12, 2024, BNN Bloomberg,  https://www.bnnbloomberg.ca/investing/2024/12/12/thousands-of-chinese-evs-clog-up-brazils-ports-in-slowdown/.

[40] Danny Lee, “Brazil Halts BYD Site After Workers Found in ‘Slave’ Conditions,” December 23, 2024, Bloomberg Originals, https://www.bloomberg.com/news/articles/2024-12-24/brazil-halts-byd-site-after-workers-found-in-slave-conditions.

[41] “Free Trade Agreements,” Office of the U.S. Trade Representative, https://ustr.gov/trade-agreements/free-trade-agreements. 

[42] Increased U.S. market access is nowhere mentioned (“Fact Sheet: The Biden-⁠Harris Administration Marks the Anniversary of the Americas Partnership for Economic Prosperity Leaders’ Summit,” November 4, 2024, https://www.presidency.ucsb.edu/documents/fact-sheet-the-biden-harris-administration-marks-the-anniversary-the-americas-partnership.

[43] Bruno Hernandez, “China-Latin America and the Caribbean: Investment, Trade, and Future Prospects,” October 20, 2023, China Briefing, https://www.china-briefing.com/news/china-latin-america-and-the-caribbean-investment-trade-and-future-prospects/.

[44] T. Ozbun, “Soybean Exports from Brazil to China from 2015 to 2023,” March 20, 2024, Statista, https://www.statista.com/statistics/721425/value-soybean-exports-brazil-china/.

[45] Mei Mei Chu and Naveen Thukral, “China Pivot from US Farm Imports Bolsters It Against Trade War Risks,” November 1, 2024, Reuters, https://www.reuters.com/markets/commodities/china-pivot-us-farm-imports-bolsters-it-against-trade-war-risks-2024-11-01/.

[46] John Coatsworth, “United States Interventions: What For?,” May 15, 2005, ReVista Harvard Review of Latin America, https://revista.drclas.harvard.edu/united-states-interventions/.

[47] “‘Until the Last Consequences I Will Be on Panama’s Side’: Colombian President Petro Supports the Country in the Face of Trump’s Statements,” December 23, 2024, Newsroom Panama, https://newsroompanama.com/2024/12/23/until-the-last-consequences-i-will-be-on-panamas-side-colombian-president-petro-supports-the-country-in-the-face-of-trumps-statements/.

[48] “‘Until the Last Consequences I Will Be on Panama’s Side’ ...”

[49] “Charter of the Organization of American States,” Organization of American States, https://www.oas.org/en/sla/dil/inter_american_treaties_A-41_charter_OAS.asp#Chapter_XIX.

[50] “United Nations Charter, Chapter I: Purposes and Principles,” United Nations (U.N.),  https://www.un.org/en/about-us/un-charter/chapter-1.

[51] Noam Raydan and Farzin Nadimi, “Houthi Shipping Attacks: Patterns and Expectations for 2025,” December 16, 2024, Washington Institute for Near East Policy,  https://www.washingtoninstitute.org/policy-analysis/houthi-shipping-attacks-patterns-and-expectations-2025.

[52] “Why Was The Suez Crisis So Important?,” Imperial War Museums (IWM),  https://www.iwm.org.uk/history/why-was-the-suez-crisis-so-important#:~:text=The%20canal%20was%20closed%20to,in%20post-1945%20British%20history.

[53] Tod Robberson, “Panama Canal a Terrorist’s Dream Come True, Say Some Officials Worried About Security After U.S. Handoff,” July 4, 1999, Dallas Morning News, https://www.nci.org/a/a7499a.htm.

[54] Megan Cerullo, “Why Is Trump Threatening a 100% Tariff on the BRICS Nations?,” December 2, 2024, CBS News, https://www.cbsnews.com/news/trump-tariffs-brics-nations-china-russia-brazil/; Jim Tankersley et al., “Trump Is Threatening Europe With Tariffs. Is It Ready?,” December 31, 2024, New York Times, https://www.nytimes.com/2024/12/20/world/europe/europe-trump-tariffs.html.

[55] Anne-Marie Slaughter, “America’s New ‘Wolf Warrior’ Diplomacy Could Cause Lasting Damage,” January 18, 2025, Financial Times, https://www.ft.com/content/f0226f61-f243-4326-ae64-9965ee9908c2.

[56] Margaret Brennan, Camille Schick, Jennifer Jacobs, and Ed O’Keefe, “Rubio to stop in Panama on first overseas trip as secretary of state,” January 23, 2025, CBS News, https://www.cbsnews.com/news/marco-rubio-central-america-trip-panama/.

This publication was produced on behalf of Rice University’s Baker Institute for Public Policy. Wherever feasible, the material was reviewed by external experts prior to its release. Any errors are the responsibility of the author(s) alone.

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author(s) and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s) and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.