Price hikes and trade war: the consequences if Donald Trump takes back the Panama Canal
Panama is the latest target of President-elect Donald Trump’s threats regarding foreign policy.
Citing high fees paid by US companies that use the maritime shortcut, Donald Trump told a crowd in Arizona that if the country does not lower prices, he will have the canal placed under US control. The US turned full control over to Panama in the late 1990s, though the Carter administration negotiated the deal in the 1970s. However, the Panamanian public and government began to voice interest in gaining control of the passage soon after the country gained independence at the turn of the 20th century.
Trump considers it “a scam”
The president-elect said that the US was being “ripped off” by Panama shortly after describing the canal as an “asset” of critical importance to the country’s economic security.
Additionally, on social media, Trump also noted that the canal is important for the “rapid deployment of the Navy, from the Atlantic to the Pacific.” Trump also based his argument on the historic contribution the US made to the canal’s construction.
“Considered one of the Wonders of the Modern World, the Panama Canal opened for business 110 years ago and was built at a HUGE cost to the United States in lives and treasure – 38,000 American men died from infected mosquitos in the jungles during construction,” reads the post.
Trump described the deal negotiated by the Carter administration as ‘foolish’ and argued that it does not give the country license “to charge the United States, its Navy, and corporations, doing business within our Country, exorbitant prices and rates of passage.”
The fees being charged by Panama are ridiculous, especially knowing the extraordinary generosity that has been bestowed to Panama by the U.S. This complete “rip-off” of our Country will immediately stop.
Panama’s president responds to Trump
The president of Panama, José Raúl Mulino, elected earlier this year, rejected the incoming US president’s request and called the demand a threat to the country’s sovereignty. Donald Trump escalated further, posting a picture of the canal to Truth Social, with a sign that reads “Welcome to the United States Canal!”
President Mulino replied to that suggestion with his own post, uploading an image of boats with flags from all over the world, with the caption, “The Canal is and will be Panamanian, boosting world trade.”
Before posting the photo, President Mulino had published a video where he emphasized that “every square meter of the Panama Canal and its surrounding areas” is the rightful property of Panama. Holding a book titled “Torrijos-Carter Treaty,” the president referred to the 1977 agreement that resulted in the dissolution of the Panama Canal Zone, transferring control of the canal to Panamanians on December 31, 1999.
The economic importance of the canal to global shipping
Established in 1914, the Panama Canal spans 80 kilometers. Annually, approximately 13,000 to 14,000 vessels navigate its waters, linking ports globally. Recognized as one of the world’s busiest trade routes, countries sometimes pay extra fees to expedite passage or circumvent congestion. For instance, in 2023, a shipping firm paid nearly $4 million on top of the standard tolls to transit the canal following a mandatory decrease in traffic as water levels dropped far lower than usual after a dry rainy season, according to a Bloomberg report.
Although his rhetoric is intense, the incoming administration would have limited powers to take control of the canal. Aside from considering military action against Panama, Trump could impose sanctions on the country. However, Panama might respond by restricting access to US companies, which would immediately affect the prices of goods for US consumers due to delays in shipments.