Could Trump seize the Panama Canal?

Shortly before Christmas, global attention turned to Central America as former and future US President Donald Trump threatened to “take back” the Panama Canal, citing the high canal tolls as his reasoning. In the following days, speculation mounted regarding the true intent behind his remarks and whether they reflected a broader geopolitical agenda.

On Tuesday during a press conference at Mar a Lago he refused to rule out the use of military force to retake the canal.

Is Panama at risk of losing control over the canal?

A short answer is that Trump does not have the means to “take back” the canal without engaging in an illegal war of aggression.

The canal zone was never US property; it was only leased. The canal is not at risk of being lost.

Instead, Trump’s statements appear to be an opening gambit in his broader strategy to regain influence in Latin America.

Some useful history

One of humanity’s most remarkable engineering feats, The Panama Canal, has connected the Atlantic and Pacific Oceans since 1914. The concept of constructing a canal through Panama’s isthmus can be traced back to the 16th century when Spanish conquistadors recognized its potential to transform global trade routes. However, it was not until the 19th century that concrete plans for the canal emerged, driven by technological advancements that made such an ambitious project feasible.

The first significant attempt to build the canal began in 1880, led by French engineer Ferdinand de Lesseps, the mastermind behind the Suez Canal. Initially, the plan was for a sea-level canal, but the technical and environmental challenges proved insurmountable. Harsh climatic conditions, tropical diseases like malaria and yellow fever and the daunting task of excavating through hilly and swampy terrain led to the project’s collapse. By 1889, more than 20,000 workers had died, and the venture’s financial backers faced bankruptcy, nearly triggering a French state financial crisis.

In the early 1900s, the United States expressed interest in constructing the canal to shorten trade and military routes. Initial negotiations with Colombia, which at the time included Panama, failed when Colombia rejected the US offer to lease the land.

The US then supported Panama’s independence movement, and on November 3, 1903, Panama declared its independence from Colombia. Two weeks later, the newly established Panamanian government signed the Hay-Bunau-Varilla Treaty, granting the US rights to lease a 16-kilometer-wide zone for constructing, operating, and defending the canal in return for an annual payment, though initially at a rate so low that it fueled later political tensions.

The US commenced construction in 1904, employing modern engineering techniques, including a lock system to manage elevation changes, and making significant efforts to combat disease by eradicating mosquitoes and improving sanitation. After a decade of intensive work, the canal officially opened on August 15, 1914, marking a new era in global trade, as ships could now bypass the perilous journey around Cape Horn.

The US viewed the canal zone as its territory, despite the fact it was leased from Panama. Despite the canal’s economic and strategic importance, US control over the waterway and its revenues stoked resentment in Panama.

Tension reached a peak in the 1960s. This led to negotiations that culminated in the 1977 Torrijos-Carter Treaty, which outlined a phased transfer of canal administration to Panama, completed on December 31, 1999. The canal has since become a symbol of Panama’s national sovereignty and economic strength.

The turn of this year marked the 25th anniversary of Panama’s assumption of control over the canal’s administration. Exactly one day before the anniversary, former US President Jimmy Carter, who had signed the 1977 treaty enabling the canal’s handover, passed away.

The legal framework is also important.

The Torrijos-Carter Treaty

Signed on September 7, 1977, by Panamanian leader Omar Torrijos and US President Jimmy Carter, the treaty that governs the transfer of the Panama Canal comprises two main agreements:

• Panama Canal Treaty: This treaty stipulated that the US would retain control of the canal’s operations, administration, and defense until December 31, 1999, at which point Panama would assume full control. During the transition, US and Panamanian authorities collaborated to ensure a smooth handover.
• Neutrality Treaty: This treaty ensures that the canal remains open to vessels of all nations, regardless of wartime or peacetime conditions, and it also grants the US the right to intervene militarily if the canal’s neutrality or functionality is threatened. This clause has been contentious, as it partially limits Panama’s sovereignty, but was deemed necessary to guarantee the free flow of trade.

Today, Panama retains full control over the canal’s management and revenue, with the US holding only a theoretical right to intervene in the event of a significant threat — conditions that have not materialized in the past 25 years.

But there are other factors at play.

An emotional issue in the US

The handover of the Panama Canal to Panama was a highly emotive and controversial topic in the United States, touching deeply rooted geopolitical, economic, and patriotic sentiments. The UA had completed it and operated it for decades. The canal was seen by many Americans as a symbol of their nation’s technological and political strength.

The transfer formalized through the Torrijos-Carter Treaty, was viewed by conservative circles, particularly Republicans, as a weakening of the United States’ global power position, a sentiment that continues to influence political rhetoric – especially within Donald Trump’s populist narrative.

There is further background that helps to explain why not everyone is willing to accept that the canal’s status has been set once and for all.

Symbol of American strength

The construction of the canal was one of the greatest engineering achievements of the US and a testament to its emergence as a global power in the early 20th century. Control over the canal was seen as a strategic advantage, securing US influence in the Western Hemisphere.

Geopolitical significance

The canal was not just an important trade route but also a strategically vital asset. It facilitated rapid movement of the US Navy between the Atlantic and Pacific Oceans. Critics of the handover expressed concerns that transferring control to Panama could compromise the security of the canal and, consequently, global trade routes.

Political context of the 1970s

During the 1970s, the US was grappling with a sense of self-doubt, shaped by the Vietnam War, the Watergate scandal and the oil crisis. Many Americans saw the canal handover as another sign of a “retreat” from global leadership. Republicans argued that the handover amounted to a “betrayal,” as the canal had been built at great sacrifice and successfully managed for decades.

Jimmy Carter’s policies

Many Republicans perceived Carter as a weak president who failed to adequately defend US interests.

The Torrijos-Carter Treaty was seen as a concession to Panama, a smaller and weaker nation, which was seen as contradictory to the sense of American national pride.

Donald Trump’s approach to the issue

Donald Trump uses the emotions surrounding the Panama Canal to paint a nostalgic picture of American strength and control, which is very popular with conservative voters.

Rhetoric on ‘lost greatness‘

Trump has previously referred to the canal’s handover as an example of the “poor negotiation skills” of prior US administrations. He builds on the notion that such decisions have diminished the United States’ global influence and national strength.

Populist narrative

Trump uses the history of the canal to bolster his “America First” policy, portraying the handover as a symbol of an era when the US was governed by “weak” leaders. This rhetoric appeals particularly to voters yearning for a return to the days of unquestioned American dominance.

Strategic connection to current issues

Trump draws parallels between the canal’s handover and current debates on trade agreements or military withdrawals. He emphasizes that, as president, he would never make “such mistakes,” a stance that resonates with both nostalgic and security-conscious voters.

The handover of the Panama Canal remains a symbol of the perceived loss of an uncontested American privilege. For many Republicans, it represents an avoidable relinquishment of geopolitical power and national honor. Trump taps into this emotional legacy to reinforce his message of restoring American strength, mobilizing his political base by framing the 1977 treaty as a prime example of weak political decision-making.

It is not a coincidence that this topic resurfaced less than two weeks before the 25th anniversary of Panama’s control of the canal and the passing of Jimmy Carter.

Economically significant for the US and China

The Panama Canal is of significant economic importance to both the United States and China. Approximately 60% of the goods transported through the canal originate from or are destined for the US, while around 20% involve China. Roughly 5% of global maritime trade passes through the Panama Canal. On average, cargo ships pay more than $200,000 in tolls for passage, with significantly higher amounts possible. These figures highlight the canal’s strategic role in international trade.

Expansion of the canal & Chinese investments

The expansion of the Panama Canal, completed in 2016 with the introduction of the so-called “New Panama Canal,” marked a pivotal moment in global shipping.

The expansion enabled the transit of neo-Panamax ships, thereby significantly increasing the canal’s efficiency and capacity. This enhancement was necessary to accommodate the growing importance of global trade, particularly the increasing flow of goods between Asia and Western markets.

China, as one of Panama’s largest trading partners and a leading global economic power, plays a central role in this context.

In addition, China has made substantial investments in infrastructure around the canal, including ports and logistics centres, further enhancing Panama’s importance as a hub for global trade. These developments highlight China’s growing influence in Latin America, making the Panama Canal a strategic focal point within Beijing’s Belt and Road Initiative.

The canal’s expansion was economically vital for Panama, as were the investments from China. However, Panama retains control over the canal.

Does China control the canal?

In recent weeks, Trump and others in the US and Europe have sought to create the impression that China has taken control of the canal, endangering its neutrality. This claim, however, is far from reality.

Panamanian President José Raúl Mulino has made it clear that neither the EU, the US, nor China controls the canal—only Panama does. He reaffirmed the canal’s neutrality during the 25th-anniversary celebrations of Panama’s full control. Over the previous 25 years, he emphasized, there has not been a single reason to doubt the canal’s neutrality.

Panama’s national motto, “Pro Mundi Beneficio” (“For the Benefit of the World”), reflects the canal’s mission of serving global interests, irrespective of the nationality of the ships using it. Following the expansion of the canal, Panama earns substantial revenue from its operations, with the tolls based on the canal’s intrinsic value rather than being part of the original treaties.

What has irked Trump is that, over the past decades, Panama has become more politically independent of the US. Panama is a nation that prioritizes its own national interests.

During his first presidency, Trump was already dissatisfied with China’s investments in Panama, as well as in Latin America at large, and his current rhetoric echoes a neo-colonial tone.

Trump has no contractual means to influence the canal’s toll structure, which is determined by market principles or by its management. A military intervention, under current conditions (with neither the canal’s security nor its neutrality threatened), would constitute an illegal act of aggression under international law.

As Trump often positions himself as a peacemaker, it is likely that his strong words aim to apply pressure on other economic developments rather than initiate concrete action.

This is particularly relevant in the context of potential future infrastructure projects in Panama, such as the railway project from Panama City to Costa Rica. The primary objective may be to exclude China from future projects.

There’s much talk now of Trump’s wish to pursue an updated version of the Monroe Doctrine, and he only encouraged such speculation when he said at Tuesday’s press conference that he wanted to rename the Gulf of Mexico. New name: Gulf of America.