Why Trump sees the Chinese threat in the Panama Canal, but the locals do not

Every day, dozens of cargo ships pass the blue cranes in the port at the entrance to the Pacific Ocean, with the towering skyline of Panama City visible beyond. About eight hours later, they blast past another terminal filled with containers as they head out into the Atlantic.

These facilities are managed by Hong Kong’s giant port operator Hutchison Whampoa. And that’s the crux of the problem for the new Trump administration, which sees the Chinese infrastructure built around the canal over the past three decades as a national security threat.

“In fact, today, a foreign country, through its companies, which we know are not independent, has the ability to turn the channel into a bottleneck at a time of conflict,” said Sen. Marco Rubio, a candidate for secretary of state. his confirmation hearing.

Panama has other Chinese-backed projects, including a canal bridge, a new subway line, a cruise ship terminal, a convention center and a wind farm. Officials in the new Trump administration say all of this is a violation of the US-Panama accords, which required the canal to remain neutral when Washington handed over the US-built canal to Panama in 1999. Trump did not rule out the use of military force to seize the back channel.

Panamanian officials and several former US military officials say the Chinese facilities do not pose a military threat, do not violate canal neutrality, or even indicate that Panama is falling under Beijing’s influence.

This tiny Central American country loves baseball, uses the US dollar as its currency and is the most pro-Washington nation in the region. Its president, José Raúl Mulino, is a center-right politician who wants to cooperate with the US on migration and security issues.

According to Joe Reeder, a former US deputy secretary of the Army who is now a member of the Panama Canal International Advisory Board, China will have a hard time converting the congested container port terminal for military use.

“No one who knows anything about military technology or tactics would view container ports around the world as a threat to national security,” Reeder said.

Wesley Clark, a retired US Army general and former NATO commander, ran the military’s Southern Command in the 1990s and moved its headquarters to Miami from Panama. “Nothing China does is ever purely commercial,” he said. But “Panama is close and we know it well. If China sought a military advantage there, we could take swift and decisive action.”

Clark and officials here said a better idea would be to convince American companies to invest in Panama. In 1996, Hutchison — a private company controlled by the family of billionaire investor Lee Kashin — outbid Japan’s Mitsubishi and America’s Bechtel to manage the ports.

A Chinese foreign ministry official said: “China will, as always, respect Panama’s sovereignty over the canal and recognize the canal as a permanent neutral international waterway.”

Trump’s spokeswoman said the president-elect is “100 percent correct about the threat China’s growing influence over the Panama Canal poses to America’s national security and economic interests.”

Trump is not alone in his concerns. Republicans criticized President Jimmy Carter for abandoning a strategic asset with the 1977 treaty. When Hutchison took office, Reagan-era Defense Secretary Caspar Weinberger said China could acquire a “very important intelligence platform.” Hutchison denied this. At the time, the Pentagon said it did not consider Hutchison’s operation a security threat.

In 2023, the head of the Southern Command at the time, General Laura Richardson, said there were five Chinese state-owned enterprises along the canal that could repurpose their facilities for military use. A military spokesman did not respond to requests to identify those individuals.

China’s national security laws can require the country’s private individuals and individuals to support government policies, blurring the roles of civilians and military, causing discomfort to many in Washington.

About 4% of world trade passes through the channel. More than 70% of the traffic goes to or comes from the USA. American oil and gas tankers carry fuel to the Pacific Ocean, while ships loaded with Peruvian asparagus, Chilean wine and Ecuadorian bananas cut their way to the US East Coast.

The canal here is a symbol of national identity and a source of wealth. About half of its annual revenue of $5 billion goes to the state treasury. When Panama took control, it invested more than $5 billion in building larger locks, which allowed more ships to pass through and led to investment in U.S. ports, which became busier as a result. Economists say the channel is an exception: a well-run state-owned company in a region notorious for corruption.

The 1977 treaty and Panama’s constitution contain principles of neutrality to protect the operation of the canal from interference by foreign countries and the Panamanian central government.

The US remains Panama’s top investor and trading partner, even as Chinese investment has supplanted the US as the dominant economic power in other Latin American countries.

The channel’s data shows that Chinese cargo is second only to the US, accounting for less than 22% of goods transported by water. According to the Panamanian government, U.S. investment in Panama was nearly $13 billion in 2023, less than $515 million from China. Chinese warships have not crossed the canal for almost a decade.

Trump says Panama charges US ships exorbitant rates, which Panamanian authorities deny. Vessel size, type and cargo determine its toll, which averages about $750,000 per crossing. US Navy vessels have priority, while commercial vessels sometimes wait up to 10 days.

“China does not take any part in our operations,” said channel administrator Ricaurte Vasquez. “We cannot discriminate against the Chinese, or the Americans, or anyone else.”

Canal chief Ricaurte Vasquez outside the administration building in Panama City.

Panama is vulnerable to Trump’s pressure precisely because of its close ties with the United States. It has neither a central bank nor an armed force. The US has intervened here before, most recently in 1989 when troops invaded to topple then-dictator Manuel Noriega.

Under the neutrality treaty, the US has the right to act if the canal faces a military or hostile threat that prevents the peaceful passage of ships. Retired General Barry McCaffrey, a former US drug kingpin who once headed the Southern Command, said a military takeover of the canal today would be illegal, spark outrage across Latin America and require US troops to occupy the country.

“We would sound like it was the 1850s,” he said. “If you’re a foreign illegal state, how would we manage the canal without Panamanians?”

China is becoming an increasingly prominent part of society in Panama, which was the first Latin American nation to join Beijing’s Belt and Road Initiative in 2017. Panama is home to a Chinese diaspora of about 200,000 people, the largest Chinese diaspora community in Central America. Chinese wine shops are neighborhood traditions, and dim sum is a favorite treat in the capital.

Alonso Illueca, who follows China’s activities in Panama at the University of Santa Maria la Antigua, said the Panamanian government is not ready to counter Beijing’s influence as its economic interests there grow.

“No one is saying that China-Panama relations should not exist,” Illueka said. “But it’s about avoiding strategic dependence on China.”

For now, American influence holds. After Panama severed diplomatic relations with Taiwan, Beijing proposed building an embassy at the Pacific entrance to the canal on an abandoned US base. The US ambassador to Panama at the time, John Feeley, said he complained to the local government.

“The symbolic effect of seeing the Chinese flag at the mouth of the canal would not be well received by the United States, a traditional friend of Panama,” Feeley said.

Old Chinatown in Panama City. The country is home to about 200,000 Chinese diaspora, the largest Chinese diaspora in Central America.

Jose de Córdoba, Costas Paris, and James T. contributed to this article. Areddy.

Email Santiago Perez at [email protected] and Kejal Vyas at [email protected]