Geopolitical Rivalry Over the Canal: The Panama Canal remains a strategic asset, with the U.S. and China competing for influence, as China’s investments in Panama grow under its Belt and Road Initiative.
Sovereignty and Neutrality: Panama asserts its control over the canal while adhering to international treaties ensuring equal access and neutrality, though external pressures challenge its sovereignty.
Environmental and Economic Pressures: Water shortages and operational constraints highlight the interplay of environmental and geopolitical challenges impacting global trade through the canal.
President José Raúl Mulino’s new remarks on Panama Canal control show how complex international politics affect this vital shipping route. International trade runs through this vital transportation project, which opened in 1914, accounting for 6% of world shipping. Both the United States and China want to use and control this important waterway because of its strategic significance but must contend with Panama’s decision-making power. The United States built the Panama Canal under the authority of the 1903 Hay-Bunau-Varilla Treaty but must pay Panama for this right. Under the Torrijos-Carter Treaties, the control of the Panama Canal shifted from the United States to Panama on December 31, 1999.
José Raúl Mulino
After the ACP administration took over, the Panama Canal’s operations have seen major extensions to service larger ships and rising movement. Increasing conflict now unfolds about U.S. presence in the area. President Trump’s statement about reclaiming the canal stemmed from Washington’s worries about China’s expansion across Latin America. Trump called the canal transfer a “stupid present” because several officials see Chinese investments in Panama as harming U.S. interests. Mulino stated clearly that Panama controls the canal and always will reject outside interference.
China has taken many different roles in Panama’s work. The Chinese government began investing in Panama after building diplomatic ties in 2017 because Panama cut relations with Taiwan. China has made big investments, including port construction under its Belt and Road Initiative. Chinese companies use Panama as a central location from which they distribute goods across multiple countries. Geopolitical matters involving the canal have multiple layers because of its operating rules. Under the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, Panama maintains full control while nations worldwide retain equal access and freedom to use the waterway. Under this treaty, the United States military can still enter Panama when risks are seen to threaten canal neutrality.
Under this regulation, any growth of Chinese influence may push the United States to act, thereby increasing tension between the leading nations. International relations are undergoing a shift that impacts how different nations make money. The Panama Canal handles 14,000 vessel transits every year, but water shortages reduced operations and raised fees before the drought started. One hundred million tons of cargo could not be transported in 2023 because of shortage-caused restrictions, which shows that environmental and geopolitical forces work together. Between country battles for Panama control, international players press their influence on local participants. Panama’s government deals with Chinese investment offers while balancing strong U.S. security and trading relationships. Panama encounters process challenges when pursuing international relations goals yet controlling its own resources.
Panama relies on international law to back its position, according to Mulino. A legal framework created by worldwide agreements allows Panama to defend its sovereign rights against international pressures. Shifts in U.S.-China geopolitical rivalry will make Panama’s legal foundation harder to defend in the future.
The Panama Canal’s security depends on how much power China and the United States exert in Latin America. Chinese port management contract renewals provide a chance and an opportunity to strengthen their hold in the canal region unless the U.S. government requires open bidding that includes local companies. President Mulino shows commitment to Panama’s independence through his words, which recognize both U.S. and Chinese roles. The story of the Panama Canal combines questions about power shifts between nations with changing national identity throughout history. The changes in these relationships between nations will impact both neighborhood politics and worldwide commerce development over time.
References
- “The Panama Canal Expansion Dispute, Vol. 1 – Cornell International Law Journal.” n.d. https://cornellilj.org/2014/01/31/the-panama-canal-expansion-dispute/.
- “US, China Clash over Neutrality of Drought-Hit Panama Canal.” n.d. Riviera. https://www.rivieramm.com/news-content-hub/news-content-hub/us-and-china-clash-over-neutrality-of-drought-hit-panama-canal-79323.
- Runde, Daniel. 2021. “Key Decision Point Coming for the Panama Canal.” Www.csis.org. May 21, 2021. https://www.csis.org/analysis/key-decision-point-coming-panama-canal.
- Dierker, David, Nicolas Lopez, John Murnane, Steve Saxon, Jaime Szigethi, and Apostolos Zampelas. 2024. “How Could Panama Canal Restrictions Affect Supply Chains? | McKinsey.” Www.mckinsey.com. January 19, 2024. https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/how-could-panama-canal-restrictions-affect-supply-chains.
- Baraniuk, Chris. 2023. “The Rival to the Panama Canal That Was Never Built.” Www.bbc.com. August 25, 2023 – https://www.bbc.com/future/article/20230825-the-rival-to-the-panama-canal-that-was-never-built.
- Rodríguez, Roberto. 2024. “Navigating Change: A Timeline of Recent & Future Progress at the Panama Canal.” Autoridad Del Canal de Panamá. February 14, 2024. https://pancanal.com/en/navigating-change-a-timeline-of-recent-future-progress-at-the-panama-canal/.
- Oppmann, Patrick. 2025. “Panama Turned Its Canal into a Money-Maker. History Shows Why Trump’s Threats Are Sounding the Alarm Bells.” CNN. January 20, 2025. https://edition.cnn.com/2025/01/20/americas/panama-canal-trump-threat-intervention-intl-latam/index.html.
- Friedman, Lisa. 2025. “Why Does Trump Want the Panama Canal? Here’s What to Know.” The New York Times, January 8, 2025. https://www.nytimes.com/2025/01/08/world/americas/trump-panama-canal.html.
Shrivara Mahajan is pursuing an International Relations major with a minor in Public Policy at OP Jindal Global University. He is a Senior Intern at the Jindal Centre for the Global South and has priorly interned with The Spread Smile Foundation. Views expressed are the author’s own.
Ashish Keserwani 
Faareha Usmani