Panama has long marketed itself as the “bridge of the world, heart of the universe,” but recently, the small Central American nation and its iconic Panama Canal, which connects the Atlantic and Pacific oceans, have become the focal point of a tense dispute between the United States and China. This conflict has left Panama, which lacks a military, in a difficult position, caught in the middle of the growing rivalry between the two global superpowers.
The conflict began when former U.S. President Donald Trump, during his second term, repeatedly claimed, without evidence, that China secretly controlled the Panama Canal. Trump suggested that the U.S. might need to take military action to “take back” the waterway, which had been handed back to Panama in 2000, especially if China’s influence was not curbed. The Panama Canal sees around 40% of U.S. container traffic, making it a critical international trade route.
Panama’s President, José Raúl Mulino, has strongly denied Trump’s allegations, while also working to ease tensions with the U.S. In February, Mulino made the decision to withdraw from China’s Belt and Road Initiative, a large-scale infrastructure investment project that had raised concerns in Washington. Despite these efforts, the U.S. continued to voice criticism, including a $22.8 billion deal announced in March by BlackRock to purchase 43 ports, including two on either side of the canal, from the Hong Kong-based company CK Hutchison. The U.S. government had previously accused Hutchison of being under Chinese influence, a claim the company denied.
The U.S. Secretary of Defense, Pete Hegseth, visited Panama in March and made clear statements aimed at quelling any fears regarding Chinese control of the canal. He reassured Panama that the U.S. would work with the country to keep the canal secure, emphasizing that “China did not build this canal” and would not be able to “weaponize” it. However, his remarks were met with a stern response from China, which questioned who truly represented a threat to the canal’s security.
In a further shift from previous U.S. rhetoric, Hegseth acknowledged Panama’s sovereignty over the canal but stopped short of explicitly recognizing it in a joint statement. The discrepancy caused confusion, especially following an earlier incident in February when the U.S. State Department had announced that Panama would waive tolls for U.S. Navy ships passing through the canal, a claim that Mulino immediately denied.
Later, Panama’s Canal Affairs Minister, José Ramón Icaza, clarified that Panama had agreed to work out a system that would allow U.S. naval vessels to pass through the canal at a neutral cost in exchange for U.S. security contributions and acknowledgment of Panama’s sovereignty over the waterway.
The situation has further strained Panama’s position. While the country has cooperated with the U.S. on immigration issues, such as closing the Darien Gap through which many migrants travel toward the U.S. and accepting deportation flights, it is increasingly wary of further U.S. demands. Panama’s government has made it clear that there is no interest in allowing U.S. military bases on Panamanian soil, despite Hegseth’s suggestion of the possibility.
As the U.S.-China conflict over the canal escalates, Panama finds itself caught in the middle, struggling to navigate the pressures from both superpowers while trying to maintain its neutrality and sovereignty.