Rising tensions between the United States and China over the Panama Canal have left the Central American nation caught in the middle of a geopolitical tug-of-war. With no military of its own, Panama finds itself in an uneasy position, evoking the old proverb: “when elephants fight, it is the grass that suffers.”
Panama, which prides itself on being “the bridge of the world, heart of the universe,” is now the stage for growing friction between the two largest global economies. The canal, a vital passage connecting the Atlantic and Pacific Oceans, handles roughly 40% of U.S. container traffic and has become a flashpoint in U.S.-China rivalry.
Since the start of his second term, President Donald Trump has accused China—without presenting evidence—of covertly controlling the canal. He warned that if this alleged influence isn’t curbed, the U.S. could “take back” the waterway it handed over to Panama in 2000, even suggesting the possible use of military force.
President José Raúl Mulino of Panama has firmly dismissed Trump’s claims but has also moved to ease tensions with Washington, including Panama’s withdrawal from China’s Belt and Road Initiative earlier this year.
In March, American investment firm BlackRock agreed to a $22.8 billion deal to acquire 43 ports, two of which are located on either side of the canal, from Hong Kong-based CK Hutchison. The Trump administration accuses the company of being linked to Beijing—an allegation Hutchison denies.
However, rather than calming the situation, these moves appear to have intensified Washington’s rhetoric. During a visit to Panama for the Central American Security Conference, U.S. Secretary of Defense Pete Hegseth issued strong warnings.
“I want to be very clear, China did not build this canal,” he said. “China does not operate this canal and China will not weaponise this canal. 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.”
China responded sharply, questioning who truly poses a threat to the canal. “People will make their own judgment,” the Chinese government said in reply.
Interestingly, Hegseth referred to Panama as a “partner” that “operates” the canal, in contrast to Trump’s earlier suggestions. Still, he stopped short of fully acknowledging Panama’s ownership. The U.S. version of a joint statement with Panama even omitted a crucial line that appears in the Panamanian version: “Secretary Hegseth recognised the leadership and inalienable sovereignty of Panama over the Panama Canal and its adjacent areas.”