US-China on very real collision course over the Panama Canal

Asia Times

27-01-2025

United States President Donald Trump's recent pledges to reclaim the Panama Canal have signaled rising US-China tensions in Latin America, America's resource-rich backyard and traditional sphere of influence.
After Trump said in his January 20 inauguration speech that it is time for the US to retake control of the Panama Canal, US Senator Eric Schmitt on January 23 introduced a resolution calling for the Panamanian government to 'expel official and interests of the People's Republic of China (PRC) and terminate Chinese management of key Panamanian ports.'
The resolution also calls upon the government of Panama to: reaffirm its commitment to the 'permanent neutrality' of the Panama Canal as defined by the Neutrality Treaty signed In 1977;
review and terminate agreements allowing Chinese state-owned enterprises or China-based so-called private entities to manage strategic infrastructure, including the ports of Balboa and Cristobal;
reaffirm its commitment to maintaining the sovereignty of Panama and protecting the security of the Western Hemisphere by seeking partnerships that align with democratic values and mutual respect.
The resolution said the US government should offer significant investments to modernize Panama's canal infrastructure and provide alternatives to Chinese-funded projects; provide technical, financial and strategic support to Panama as it seeks to assert sovereignty over its critical infrastructure, and reduce its dependence on entities affiliated with the PRC.
In short, Schmitt's resolution calls for the termination of the operational concession granted by the Panama Maritime Authority (AMP) to Hutchison Ports Holdings, a port management company with global interests controlled by Hong Kong tycoon Li Ka-shing.
'This has been a concern for a while that China effectively has controlled the Panama Canal. They control ports on either end. Why is that important? Because most of the goods that we transport to the Pacific go through the Panama Canal,' Schmitt told Fox News in an interview.
'The canal is not neutral anymore. It's part of China's Belt and Road Initiative, where they buy up ports, they build airports and if you criticize the CCP, you may not get flights anymore,' he said. 'They build infrastructure that they can turn on and off. We simply, from a national security perspective, cannot have that situation.'
He said the US did not consider the fact that its navy would have to go through the Panama Canal before it 'foolishly gave it away.' 'The 21st century will be defined by who wins the great powers competition between America and communist China,' he added.
Over the past 20 years, China has significantly boosted its trade and investment with Latin America.
The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) said in a report that the trade volume between China and LAC countries has rose in recent years, reaching US$489 billion in 2023. That figure was only $18 billion in 2002.
Also in 2023, China's overseas direct investment (ODI) in Latin America and the Caribbean amounted to about $9 billion, or 6% of the region's total ODI. The US has been closely monitoring whether China will use its economic influence in Latin America for political and military purposes in the region.
Last November, Chinese President Xi Jinping inaugurated the Chancay mega-port in an online ceremony in Peru on November 14. State media said the Chancay port will help China boost trade and implement its Belt and Road Initiative.
Mauricio Claver-Carone, the US State Department's Special Envoy for Latin America, said the US might impose a 60% tariff on all goods coming from the Chancay port.
But the Panama Canal is in Trump's immediate sights. In a media briefing on January 7, Trump refused to rule out the possible use of military force to retake control of the Panama Canal, a threat he reiterated during his inaugural address.
'The Panama Canal, which has foolishly been given to the country of Panama after the US spent more money than ever spent on a project before and lost 38,000 lives in the building of the Panama Canal,' Trump said in his speech on January 20.
'The purpose of our deal and the spirit of our treaty has been totally violated. American ships are being severely overcharged and not treated fairly in any way, shape or form. And that includes the United States Navy,' he said. 'China is operating the Panama Canal. And we didn't give it to China. We gave it to Panama, and we're taking it back.'
On the same day, the Panamanian government said it has started an audit of the local unit of Hutchison Ports. Panamanian Comptroller General Anel Bolo Flores promised to conduct a probe to ensure that Hutchison is in compliance with its 25-year concession for the Balboa and Cristobal container terminals.
Prior to this, Panamanian President Jose Raul Mulino said last December that Panama's sovereignty and independence are not negotiable, and that the Panama Canal is not under direct or indirect control by any power.
'China does not take part in managing or operating the canal. Never ever has China interfered,' Mao Ning, a Chinese Foreign Ministry spokesperson, said in a media briefing on January 22. 'We respect Panama's sovereignty over the canal and recognize it as a permanently neutral international waterway.'
Diplomatic relations between China and Panama began in June 2017 after the Panamanian government cut century-old diplomatic ties with Taiwan and leaned towards Beijing.
In December 2018, Panama signed on to Beijing's Belt and Road Initiative. Citing a WhatsApp conversation, media reports said former Panamanian President Juan Carlos Varela had received US$143 million of 'donation' from Beijing to cut the Panama-Taiwan ties.
According to Schmitt's resolution, US construction of the Panama Canal required more than a decade of work (1904–1914), involved tens of thousands of workers and cost approximately $375 million, equivalent to more than $10 billion in 2025, with thousands of workers losing their lives due to disease and hazardous conditions.
The workforce that built the Panama Canal came mainly from the West Indies, a group of islands in the Caribbean Sea, according to US National Archives' Rediscovering Black History. But some pro-China media outlets have claimed that those who lost their lives in building the Panama Canal were Chinese migrants.
The South China Morning Post, in an article published on January 20, claimed that thousands of Chinese lost their lives to build the canal and railways in Panama.
Xiong Chaoran, a columnist at Guancha.cn, claims in an article published on January 25 that Chinese workers left marks with their sweat and blood on the Panama Canal. He criticized US lawmakers for cooperating with Trump in hyping up the Panama Canal issue.
The Chinese Historical Society of America said 15,000 Chinese migrant workers helped build the United States Transcontinental Railroad, which was completed in 1869. Researchers said hundreds of these workers lost their lives during the construction.
In 1977, the Panama Canal Treaty was signed by US President Jimmy Carter and Commander of Panama's National Guard General Omar Torrijos. It guaranteed that Panama would gain control of the Panama Canal after 1999.
In 1997, Hutchison Port Holdings (Hutchison Ports), a subsidiary of CK Hutchison Holdings, which owns the London-listed CK Infrastructure Holdings, initiated operations in Panama through an extendable concession of 25 years plus 25 years granted by the Panamanian government to manage the ports of Balboa and Cristobal at both ends of the Panama Canal.
In 2021, the Panamanian government renewed the concession for Hutchison Ports by 25 years.
Asia Times sent a right of reply request to Hutchison Ports but had not yet received a reply at the time of publication. The company has so far not replied to any media inquiries on the issue.
Some Hutchison Ports' operations are listed as Hutchison Port Holdings Trust on the Singapore Exchange. The listed trust has not made any new filings to the bourse recently.
According to CK Hutchison's website, Hutchison Ports is the world's 'leading port investor, developer and operator' and operates a network of 53 ports across 24 countries throughout Asia, the Middle East, Africa, Europe, the Americas and Australasia.
Hutchison Ports operates ports in Mexico and the Bahamas in North America and a container terminal in Buenos Aires, Argentina in South America. It also operates ports in the United Kingdom, the Netherlands, Germany, Belgium, Italy and Spain.
It's unclear if Washington will put pressure on other port facilities it considers strategic for being under Chinese influence.
Yong Jian is a contributor to the Asia Times. He is a Chinese journalist who specializes in Chinese technology, economy and politics.
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