Trump's vow to reclaim Panama canal amid China tensions

The Panama Canal is one of the most vital maritime routes globally, serving 170 countries. It connects to 180 other shipping routes and provides access to over 1,900 ports. According to official data, nearly 75% (176 million tons) of cargo traffic through the canal is attributed to the United States, with China in second place (21.4%, 50 million tons). Japan ranks third (14.6%).

In 2018 alone, 487 million goods were transported through the Panama Canal, and forecasts suggest this will increase to 573 million tons this year. Meanwhile, revenue from this route is expected to reach 5.62 billion balboa (Panama's currency, approximately $23.18 billion).

— "Panama breached our trust, violated the spirit of our cooperation because American ships are subject to huge fees. This shouldn’t be, and besides, Chinese ships are navigating the Panama Canal, and we certainly didn’t give the Panama Canal to China. We will reclaim the Panama Canal," Donald Trump declared right after his inauguration.

The 50-mile crossing connecting the Pacific and Atlantic Oceans was built over 100 years ago by Americans. However, the revenues generated by this waterway are received by Panamanians, and the United States guaranteed its neutrality and control of the territory on both sides. In 1977, President Jimmy Carter signed military treaties with Panama's dictator, Omar Torrijos, to transfer control of the canal by the end of 1999. Washington, however, retained the right to defend the route if its neutrality was threatened. In this context, Trump talks about China.

In reality, the Panama Canal consists of two canals leading to an artificial lake where ships pass through. The port operators at both ends are run by the private company CK Hutchison Holdings based in Hong Kong. It's a giant operation, explains Dr. Michał Bogusz, a chief specialist of the Chinese Team at OWS.

According to bairdmaritime.com, Hutchison Ports is the world's largest investor, developer, and operator, with activities at 53 ports in 24 countries across Asia, the Middle East, Africa, Europe, the Americas, and Australasia. The founder of Hutchison is currently 96-year-old Li Ka-shing, one of the wealthiest Asians, with a fortune estimated at $35.5 billion. The businessman holds both Chinese and Canadian citizenship.

The chairman of the board and manager of the company is his son Victor Li, who was kidnapped in 1996 by a Hong Kong triad. His father paid the ransom, the gangsters released him, and the investigation was not reported to the Hong Kong police, as it was taken over by Chinese security services. The perpetrators were caught, taken to China, and executed there. The family owes a debt of gratitude to Chinese security, though it is still unknown why the kidnapping occurred and what exactly happened. Various theories could be speculated as to whether the Chinese themselves were involved in the kidnapping. This raises suspicions, and in this context, Trump poses legitimate questions, explains Dr. Bogusz.

However, the Panamanian government rejects these accusations. President José Raúl Mulino emphasizes that "the Canal was, is, and will remain Panama's property, and its administration will continue to be conducted by Panama, respecting its neutrality permanently."

According to a report published by IDB Invest, revenues from the Canal generate nearly 8% of Panama's GDP. Additionally, 55,000 people are employed directly and indirectly with the crossing. The Atlantic Council think tank notes that Washington is a very important economic partner of Panama, accounting for $3.8 billion annually in direct foreign investments. "The United States can influence decision-making in Panama," it reads.

Despite Mulino's assurances of independence, on the day of Trump's inauguration, Panamanian authorities began an audit of the port operator CK Hutchison Holdings.

— If they want to find something, they will. The question is whether Trump scared them enough that they will want to get rid of the Chinese from managing the Canal themselves. Trump's security concerns are linked to the fact that the operator knows what, where, and when flows. It opens the field for sabotage. Imagine a fleet sailing to the Pacific to participate in battles around Taiwan, and there's a malfunction, for example, at a lock gate, and the workers "lost the key to the gates"— the expert explains.

In this context, Dr. Bogusz recalls the German communists in 1920 during the Polish-Soviet War organizing strikes blocking ammunition transport to Poland.

— That's why the port in Gdynia had to be built, and Poland demanded a facility on Westerplatte to have its own military depot. The question is whether a similar story could occur at the Panama Canal. If there were a confrontation between the U.S. and China, it would mean that the conflict involves the country that built the Canal with the nation managing it in a third country, namely Panama. At the same time, the crossing itself is strategic for Americans, adds the analyst.

In a similar tone, Greg Curley, a United States Marine Corps fellow at the Atlantic Council's Scowcroft Center for Strategy and Security, commented for the Atlantic Council. "Washington cannot afford to overlook China's growing influence, especially considering the strategic significance of the canal in the U.S.-China rivalry — China is its second-largest client. Trump's statements are likely meant to pressure Panama on transit customs tariffs, warn Panama of increased dependency and collaboration with China, and demonstrate the U.S.'s determination," wrote Curley.

The Chinese are not taking panic actions for now and are closely watching the Republican's decisions. There are reports that Trump will go to Beijing to meet with the Chairman of the People's Republic of China, Xi Jinping, during the first 100 days of his administration.

— Beijing felt relief that Trump did not impose high tariffs on the first day in office. The Panama Canal was put on the back burner, but in my opinion, it's premature optimism. It is no coincidence that Trump unblocked TikTok for 75 days, not 90 days, as he could have. During this time, Beijing is expected to find a solution to the problem with the app that will satisfy Washington. At the same time, Trump is making demands and is already building an agenda for a possible meeting. And Beijing is already preparing. After Trump's inauguration, the People's Daily reported that Xi Jinping talked with Vladimir Putin. Both leaders have already started coordinating their decisions related to Trump — Dr. Bogusz concludes.

Piotr Bera