Decoded: Why Donald Trump wants to retake control of Panama Canal

Donald Trump's said that the US 'foolishly' ceded the canal to Panama, blaming the 'ridiculous' fee charged to American ships to pass through the channel

US President-elect Donald Trump stoked a row after he suggested that his new administration could try to regain control of the Panama Canal, which was relinquished in 1999. This drew a sharp response from Panama’s President Jose Raul Mulino, who said such an idea would never be entertained.

 

Reacting to Trump’s statement, Mulino shared a video on his social media handles on Sunday. “Every square meter of the Panama Canal and its adjacent areas belongs to Panama and will continue belonging to Panama,” Mulino said in the video.

 

What did Donald Trump say?

 

At a recent rally, Trump said that the US “foolishly” ceded the canal to Panama, blaming the “ridiculous” fee charged to US ships to pass through the channel which links the Atlantic and Pacific Oceans.

 

 

“Our Navy and Commerce have been treated in a very unfair and injudicious way. The fees being charged by Panama are ridiculous,” Trump said, according to the Associated Press.

 

“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,” he said.

 

Trump also highlighted China’s growing influence around the canal, which he called a “worrying trend for American interests”. “It was solely for Panama to manage, not China, or anyone else,” Trump said. “We would and will never let it fall into the wrong hands.”

 

On this, Mulino said the Panama Canal has no “direct or indirect control from China, nor the European Union nor the United States or any other power.”

 

Trump later responded to Mulino’s video through a post on Truth Social. “We’ll see about that,” he said.

 

Why Trump wants Panama Canal?

 

The Panama Canal was built by the US in 1914 to facilitate the transit of commercial and military vessels between its coasts. However, the US relinquished control of the canal as part of the 1977 Torrijos-Carter Treaties. The treaty was a result of significant pressure from Latin American countries, including Panama, to end US control, which was seen as a symbol of imperialism.

 

Panama gained full control of the canal on 31 December, 1999. The US continued to have a role in its operations through the Panama Canal Authority under a neutrality agreement.

 

The canal is crucial for both the US and Panama. For the US, it significantly reduces travel time for ships by eliminating the lengthy voyage around Cape Horn. According to a Center for Strategic and International Studies (CSIS) data from 2019, 66 per cent of the cargo traffic transiting the canal began or ended its journey at a US port.

 

Additionally, the canal is essential for the US's energy trade as it supports the transportation of oil and liquefied natural gas (LNG).

 

China’s expanding influence in Panama

 

For Panama, the canal is crucial for its economy, generating about one-fifth of that government’s annual revenue. Notably, China has significantly increased its presence around the Panama Canal through various investments and infrastructure projects, though it does not control the canal’s operations.

 

According to a CSIS report, Chinese companies have been involved in significant infrastructure developments near the canal. For instance, China Communications Construction Company (CCCC) and China Harbor Engineering Company (CHEC) were awarded a $1.4 billion contract for the canal’s fourth bridge. Another Chinese firm, Shanghai Gorgeous, invested $900 million in a natural gas-fired electricity generation facility in the area. 

 

Are US ships being charged more?

 

The Panama Canal depends on reservoirs to operate its locks. However, the operations were heavily affected by 2023 Central American droughts that forced substantial reduction in the number of daily slots for crossing ships.

 

With fewer transit of ships, administrators also increased the fees that are charged to all shippers for reserving a slot.

 

However, with weather returning to normal, the transit on the canal has normalised. But according to the Associated Press, price increases are still expected for next year. According to Mulino, the fees for ships crossing the canal are set by experts who take into account operational costs, and supply and demand factors.

 

(With inputs from agencies)