U.S. and Panama Canal Dispute

On December 22, 2024, Donald Trump threatened to reclaim the Panama Canal, criticizing the  treaty as "foolish." He demanded its return to the U.S., stating concerns over unfair treatment of the U.S. Navy and Commerce. Panama’s President José Raúl Mulino rejected Trump's assertions, affirming Panama's ownership of the canal.

Why is Trump Upset with Panama?

• High Transit Fees: 
  The primary concern is the elevated transit fees imposed by the ACP (Panama Canal Authority) on U.S. vessels. A severe drought in 2023 affected water levels in Lakes Gatun and Alhajuela, crucial for canal operations. This led to a 36% reduction in crossing slots, thereby increasing transit fees.
• Chinese Influence: 
  The rise of Chinese presence in the canal is unsettling for the U.S. In 2017, Panama signed a Belt and Road Initiative (BRI) agreement, boosting Chinese investments. Hutchison Ports PPC, a Hong Kong-based firm's subsidiary, operates ports near the canal's entrances, raising concerns about China's influence over operations and U.S. Navy surveillance.

What is the U.S.-Panama Treaty?

• The Panama Canal, an 80-kilometer artificial waterway, connects the Atlantic and Pacific Oceans, vital for global trade, facilitating 6% of maritime trade. 
• The Torrijos-Carter Treaties of 1977 led to the U.S. transferring control of the canal to Panama on December 31, 1999. The treaties established the canal's neutrality and allowed the U.S. rights to defend its neutrality and priority passage during military emergencies.

Panama’s Response

• President José Raúl Mulino refuted Trump's claims, asserting the transparency and international standard compliance of the transit fees. He dismissed allegations of foreign influence, emphasizing Panama’s sovereignty and clarified the absence of Chinese military presence.

What Next?

• Diplomatic discussions are expected to address concerns over fee hikes and operational logistics. While the U.S. may pressure Panama for renegotiations, Panama seeks international support to uphold its sovereignty.
• China responded by acknowledging Panama’s ownership of the canal, with Foreign Ministry spokesperson Mao Ning highlighting the canal's significance to Panama and respecting its sovereignty.