Does China “run” the Panama Canal, as Trump says?

During his inaugural address, President Donald Trump doubled down on his claim that China controls the Panama Canal.

“China runs the Panama Canal and we did not give it to China. We gave it to Panama and are taking it back,” he said.

The 51-mile (82 km) Panama Canal cuts through the Central American country and is the main link between the Atlantic and Pacific oceans.

Up to 14,000 ships use it each year as a shortcut to a journey that, before the canal was built, would have taken them on a long and expensive journey around the tip of South America.

Mentioning Panama in his inaugural address is not the first time he has focused attention on the Central American country and its transoceanic canal.

On Christmas Day, Trump posted on social media that China’s “fine soldiers” were “lovingly but illegally running the Panama Canal,” a claim that was quickly denied by officials in Panama and Beijing.

At the time, Panamanian President José Raúl Molina described the claim as “nonsense”, stressing that there was “absolutely no Chinese interference” in the canal.

Trump has also threatened to retake the canal by force, citing “exorbitant” tolls allegedly charged for US vessels passing through it – another claim rejected by Panamanian authorities.

After Trump’s inaugural address, President Mullina reiterated that there is “no country in the world that would interfere with our management” of the Panama Canal.

The strategic waterway, which handles about 5% of the world’s maritime trade, is managed by the Panama Canal Authority, an agency of the Panamanian government, not by Chinese soldiers.

However, Mr Trump’s vague statement reflects concerns among some US officials about China’s significant investment in the canal and its surrounding infrastructure.

Historically, the United States has played a key role in the construction and management of the passage connecting the Atlantic and Pacific oceans.

After an unsuccessful attempt by the French to build it, the United States secured the rights to implement this project. The construction of the canal was completed in 1914.

It remained under US control until 1977, when then-President Jimmy Carter signed a treaty to gradually hand it over to Panama, which Trump called “stupid.”

Since 1999, the Panama Canal Authority has had exclusive control over the operation of the waterway.

Treaties signed by both the U.S. and Panama stipulate that it must remain permanently neutral, but the U.S. reserves the right to defend any threat to the canal’s neutrality with military force under the treaty.

There is no public evidence that the Chinese government exercises control over the channel or its military. However, Chinese companies have a significant presence there.

From October 2023 until September 2024. China accounted for 21.4% of the volume of cargo transiting the Panama Canal, making it the second largest user after the United States.

China has also invested heavily in ports and terminals near the canal in recent years.

Two of the five canal-side ports, Balboa and Cristóbal, located on the Pacific and Atlantic sides, respectively, have been operated by a subsidiary of Hutchison Port Holdings since 1997.

The company is a subsidiary of the publicly traded CK Hutchison Holdings, a Hong Kong conglomerate founded by Hong Kong businessman Lee Ka-shin. It has port operations in 24 countries, including the UK.

It has port operations in 24 countries, including the UK.

Although it is not Chinese state property, says Ryan Berg, director of the US Program at the Center for Strategic and International Studies, there have been concerns in Washington about how much Beijing will be able to control the company.

A wealth of potentially useful strategic information about ships passing through the waterway passes through these ports.

“There is growing geopolitical and economic tension between the US and China,” says Berg. “This kind of cargo information would be very useful in the event of a supply chain war.”

CK Hutchison did not respond to a BBC request for comment.

According to Andrew Thomas, a University of Akron professor who wrote a book about the canal, bids to operate these ports faced little to no competition. “The US didn’t really care about those ports at the time, and Hutchison didn’t face any objections,” he says.

Chinese companies, both private and state-owned, have also increased their presence in Panama with billions in investment, including a cruise terminal and a bridge to be built across the canal.

That “Chinese action package,” as Mr. Thomas describes it, may have prompted Trump to claim that the canal “belongs” to China, but operating those ports does not equate to ownership, he points out.

Beijing has repeatedly stated that China’s ties with Latin America are characterized by “equality, mutual benefit, innovation, openness and people-to-people benefits.”

Panama’s strategic location means that China has been struggling for years to increase its influence in the country and expand its presence in a continent that has traditionally been considered the US’s “backyard”.

In 2017, Panama severed diplomatic relations with Taiwan and established official relations with China, a major victory for Chinese diplomacy.

A few months later, Panama became the first Latin American country to join China’s landmark Belt and Road Initiative, a trillion-dollar global infrastructure and investment initiative.

The Dominican Republic, El Salvador, Nicaragua and Honduras followed suit and also cut ties with Taipei in favor of Beijing.

China is slowly expanding its soft power, opening its first Confucius Institute in the country and providing a grant to build a railway. Chinese companies have also sponsored “media training” for Panamanian journalists.