The Panama Canal, opening up direct access between Atlantic and Pacific, became the key waterway. This critical strategic importance has heightened geopolitical tensions, most significantly between the United States and China. In fact, Fox News host Pete Hegseth just last week called China a new threat to the canal. In fact, fears of Chinese hegemony throughout the area have grown considerably.
It was the United States’ construction of the Panama Canal in the early 1900s. It was intended to allow commercial and military vessels to rapidly move between its banks. The United States ceded control of the strategic waterway to Panama on December 31, 1999. This transfer was the implementation of a treaty that then-President Jimmy Carter signed in 1977. Written in the heat of the Cold War, this treaty very specifically requires the canal’s permanent neutrality. Turn of events though well founded, luck or fortuitousness badly described this point.
A consortium based in Hong Kong now has a 25-year lease on ports at each end of the canal. On the ground, they are proactively managing these critical arteries. Today, the Panamanian government is still auditing this lease, as irregularities have been found. All this has U.S. officials very concerned. They have argued that corporations tied to China are already getting a disproportionate control over important infrastructure in the territory of the canal, perhaps in breach of the Chinese treaty.
In recent public remarks, Hegseth has underscored the U.S. interest in keeping watch over the canal’s operations. He added, “I really want to be very clear on this point—China did not build this canal.” He further said, “China doesn’t control this canal, and China will never weaponize it.” What his comments suggest is the level of concern within U.S. government officials. In particular, they are concerned that Chinese investment may strengthen surveillance capacities across Panama.
The U.S. has similarly expressed concerns over the ramifications of Chinese control over the strategic waterway. That fear isn’t misplaced—the Panama Canal is one of the most important arteries for maritime trade and military move, too. In response to these issues, the U.S. negotiated a side agreement with Panama. Under the treaty, U.S. warships could transit through the canal toll-free.
In fact, the Chinese embassy in Panama responded aggressively to Hegseth’s allegations. They turned around and blamed the U.S. for conducting a reckless smear campaign over a ‘theoretical Chinese threat’ to sabotage cooperation between China and Panama. Moreover, they claimed that these narratives are the product of U.S. geopolitical interests, rather than any real threat from China.
José Raúl Mulino, then Panama’s minister of foreign affairs, underscored the need to highlight the common ground between Panama and the U.S. As he put it, “we are not going to talk about what is impossible, but talk about those things that matter to both countries.”
Despite Panama’s denial of any undue Chinese influence over canal operations, U.S. frustration persists regarding the narrative surrounding China’s involvement. Hegseth reiterated the U.S.’s resolve to prevent any threats to the canal’s operation, asserting that “together with Panama in the lead, we will keep the canal secure and available for all nations through the deterrent power of the strongest, most effective and most lethal fighting force in the world.”
This developing saga underscores the growing role that international relations, particularly those relating to strategic infrastructure and national security interests, play in domestic policy. The Panama Canal is still a major bellwether, not just for Panama, but the entire global trade landscape.