Setting the Record Straight About the Panama Canal

President Trump has convinced many Americans that the Panama Canal, a vital shipping route for international commerce—particularly for cargo going to and originating in the United States—is controlled by China. He views this as a direct threat to the U.S. He also believes that the Panamanians are charging U.S. ships too much for using the canal. As a result, he threatened Panama with military force, intending to take the canal from them and put it under Washington’s control.

Anyone remotely familiar with how deeply rooted the canal is in Panama´s psyche and how entangled the whole issue is with Panamanian nationalism would have easily predicted the passions these threats would stir among Panamanians. Ironically, this comes at a time when Panama has a pro-U.S. administration. Even though Trump often uses bluster in such cases, he may not literally mean what he says. It’s likely that he is trying to pressure Panama to make life difficult for China while scoring points at home.

Be it as it may, China is very far from controlling the canal. Here are the facts: The Panama Canal is run entirely by the Panamanian Canal Authority, a government body with no ties to Beijing. The expansion of the canal, a major multiyear project whose cost amounted to US$5.25 billion a few years ago, was funded by cash flows from the canal’s traffic itself (US$3.15 billion) and by multilateral bodies (US$2.3 billion) from Japan, Europe, another two whose main source of funds is the United States and one funded by Latin America, Spain and Portugal. Also, the bulk of the work was assigned to a European consortium made up of Spanish, Italian, and Belgian capital as well as Panamanian money. 

Six ports handle most of the cargo in Panama. Two of them, Balboa and Cristóbal, are operated by CK Hutchinson Holdings, the Chinese concern owned by Li Ka-shing, the well-known tycoon. However, the most important port, Manzanillo, is controlled by SSA Marine, whose parent company, based in Seattle, is owned by American investors. The port of Colón is operated by a Taiwanese company, which is not exactly an ally of China. Panama International Terminal is run by a company based in Belgium and Singapore, both American allies. Even the smaller Almirante port is owned by Chiquita Brands, a U.S. company with historical ties to American imperialism.

It should come as no surprise that Hutchinson is interested in Panama’s ports. After all, it is the world’s largest owner/operator of maritime terminals, with operations in over 27 countries, including California’s Long Beach. Panama, in any case, is not a significant part of Li Ka-shing’s empire since it accounts for only 3.8 percent of Hutchinson’s worldwide throughput (82.1 million TEUs). 

Indeed, a large part (more than 70 percent) of the Panama Canal’s traffic has to do with the United States—for a total cost of about $2.4 billion a year in tolls in Fiscal Year 2024, or an average of $7 million per day. Panama charges about $16 per ton. Does it sound like the Panamanians are really exploiting the U.S. economy? The U.S. government, which borrowed about $6.3 billion per day in Fiscal Year 2024, has many problems, but the Panama Canal is not one of them. And the U.S. economy, whose productivity has been low for many years and which is suffering from significant inflation, also has problems. Paying $7 million a day in tolls for trade that benefits American consumers and producers is certainly not among them.

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