Decoded: Why Trump wants Panama Canal back and what it means for the world

Donald Trump criticised Panama Canal fees as a 'rip-off' and raised alarms about China's influence near the canal, sparking a renewed debate over its trade role and sovereignty

The Panama Canal, a monumental feat of engineering, stands as a crucial global trade route connecting the Atlantic and Pacific Oceans. For over a century, it has served as a shortcut for ships, saving them from a perilous journey around the southern tip of South America. Its strategic importance has made it a recurring subject of political tension, particularly with the United States, which has historically exerted significant influence over its operation.

   

Recently, the canal has made headlines again following remarks by former President Donald Trump, who called for the waterway’s return to the US unless Panama adjusts its management. These statements have reignited discussions about the canal’s economic significance, its history, and its future.

 

   

Why does Trump want the Panama Canal back?

   

In a recent post on his Truth Social platform, Donald Trump expressed outrage over what he perceived as “exorbitant” fees charged by Panama for the use of the canal. He described the fees as “ridiculous” and criticised Panama for what he called a “rip-off” of the US, a country that had “bestowed extraordinary generosity” upon Panama. Trump’s remarks, made in the run-up to his second presidential campaign, emphasised that he would not let the canal fall into the “wrong hands,” alluding to China’s growing influence in the region.

   

Panama’s President, José Raúl Mulino, quickly responded, rejecting Trump’s claims. Mulino dismissed the notion that Panama’s fees were inflated and emphasised the country’s sovereignty over the canal. “Every square metre of the Panama Canal and its adjacent zones is part of Panama, and it will continue to be,” he said in a video statement. This exchange underscores the complex dynamics surrounding the canal’s ownership, management, and its global significance.

   

What makes the Panama Canal so important?

   

The Panama Canal is one of the most important waterways in the world, with a pivotal role in international trade. It serves as a shortcut for ships travelling between the Atlantic and Pacific Oceans, saving them the lengthy detour around Cape Horn at the southern tip of South America. Spanning 51 miles (82 km) across the Isthmus of Panama, the canal provides a faster and safer route for commercial vessels, reducing travel by as much as 7,000 nautical miles.

   

In the fiscal year 2023, nearly 12,600 ships passed through the canal, transporting over 500 million tons of cargo, including essential goods like food, minerals, and industrial products. The US is the canal’s largest customer, responsible for about 75 per cent of the traffic, followed by China. The Panama Canal thus plays a central role in global trade, particularly in the transportation of goods between North America and Asia.

   

The Panama Canal is not just a strategic asset; it is also an economic powerhouse. The canal handles approximately $270 billion worth of cargo annually, making up about 40 per cent of all US container traffic. In 2023, the US exported 125.6 million long tons of cargo through the canal, primarily to Asia. The canal saves shipping companies substantial amounts in fuel and shipping costs, with estimates suggesting savings of between $450 million and $750 million per year compared to alternative routes.

   

What are the items of trade passing through the Panama Canal?

   

In terms of trade routes, the Panama Canal connects several crucial international corridors, including the East Coast of the US to Asia (the Far East), the East Coast of the US to the West Coast of South America, and Europe to the West Coast of South America. These routes accounted for a total net tonnage of approximately 510,370 PC/UMS (Panama Canal/Universal Measurement System) tons in fiscal year 2023, illustrating the canal’s indispensable role in facilitating international trade across various regions.

   

The canal plays a crucial role in transporting a wide variety of goods essential to global trade. Among the main commodities transported through the canal, containerised cargo represents a significant portion, encompassing a broad range of manufactured goods and consumer products. Crude oil and fuels also make up a substantial volume of the canal’s traffic, reflecting the canal’s importance to the energy sector. Another key commodity is coal, with shipments flowing primarily from South America to markets in Asia and beyond. Additionally, the canal is a vital route for transporting major grains such as corn, soybeans, rice, and oats, underscoring its role in agricultural trade. Minerals and metals, including iron ore, copper, and aluminium, are also significant, driven by demand from industrialised nations. Finally, various chemicals pass through the canal, supporting global manufacturing and production processes.

   

How does it fare against the Suez Canal?

   

While the Panama Canal is crucial to US trade, it is smaller in scale compared to the Suez Canal, another vital maritime route. The Suez Canal handles about 12–15 per cent of global trade, with over 19,000 vessels transiting it annually. In contrast, the Panama Canal accounts for about 5 per cent of global maritime trade, handling approximately 14,000 vessels per year. However, the Panama Canal remains indispensable for US trade, particularly with East Asia.

   

Panama has a long and complex history

   

The story of the Panama Canal is marked by both engineering triumphs and political strife. The idea of a shortcut across the Americas was first proposed by the Spanish in the 16th century but remained an elusive dream until the early 20th century. The US, under President Theodore Roosevelt, made the construction of the canal a strategic priority, believing that such a waterway was essential for strengthening the US’s military and economic influence.

   

In 1903, with the support of the US, Panama declared independence from Colombia, and a treaty was signed granting the US control over a 10-mile strip of land to build the canal. The canal was completed in 1914, but the process came at a significant human cost. An estimated 5,600 workers, mostly from the Caribbean, died due to accidents and diseases such as malaria and yellow fever. Despite these losses, the completion of the Panama Canal cemented the US’s status as a global engineering and technological superpower.

   

For much of the 20th century, the canal remained under US control, but tensions between the US and Panama grew, particularly regarding the treatment of Panamanian workers and the US’s exclusive control of the Canal Zone. These tensions culminated in 1964, when riots broke out in the Canal Zone, resulting in the deaths of 28 people. The US and Panama entered into negotiations to resolve the issue, eventually leading to the signing of the Torrijos-Carter Treaties in 1977. These agreements outlined a process for the gradual transfer of the canal back to Panama.

   

Full Panamanian control was achieved in 1999, after a period of joint US-Panamanian administration. The transition was not without challenges, including the 1989 US invasion of Panama to oust military leader Manuel Noriega, but it marked the end of the US’s direct control over the canal.