Why is Trump threatening to take over the Panama Canal?

On Sunday, United States President-elect Donald Trump said that his new administration will try and regain control of the Panama Canal.

His statements drew rebuke from Panama President Jose Raul Mulino.

Here is more about what Trump said and why the Panama Canal is significant to the US:

What did Trump say?

Trump brought up the Panama Canal at AmericaFest, an annual event organised by conservative group Turning Point.

“We’re being ripped off at the Panama Canal like we’re being ripped off everywhere else,” he said at the Arizona event, adding that the US “foolishly gave it away”.

Following AmericaFest, Trump posted a picture on his Truth Social platform of the US flag flying over a narrow water body with the caption: “Welcome to the United States Canal!”

After Trump’s statement, he and Panamanian President Mulino traded barbs.

“Every square metre of the Panama Canal and the surrounding area belongs to Panama and will continue belonging [to Panama],” Mulino said in a recorded statement published on his X account.

Trump reposted a news article about Mulino’s statement on his Truth Social platform, captioning it: “We’ll see about that”.

On Saturday in a Truth Social post, Trump also hinted at China’s growing influence over the Panama Canal. “It was solely for Panama to manage, not China, or anyone else,” he wrote. “We would and will NEVER let it fall into the wrong hands!”

China does not control the canal. However, a Hong Kong-based corporation, CK Hutchison Holdings has operated two of the canal’s ports, located on the Caribbean and Pacific entrances, since 1997.

In his Sunday statement on X, Mulino also said that China does not have influence over the Panama Canal.

What is the dispute about?

The Panama Canal is a man-made water passage built on the Panama Isthmus, linking the Pacific Ocean to the Atlantic Ocean.

Up to 14,000 ships traverse the canal annually. The waterway accounts for an estimated 2.5 percent of global sea trade and 40 percent of all US container traffic.

The canal is crucial to the US for importing goods from Asia. The US also uses the waterway to export commodities, including liquified natural gas.

Who built the canal?

The canal was built between 1904 and 1914, mostly by the US, with then-President Theodore Roosevelt overseeing the construction.

Who owns it?

The government of Panama owns the canal.

When did Panama get ownership?
On December 31, 1999, the US handed over the ownership of the canal to Panama under a 1977 treaty signed by then-President Jimmy Carter.

“If the principles, both moral and legal, of this magnanimous gesture of giving are not followed, then we will demand that the Panama Canal be returned to the United States of America, in full, quickly and without question,” Trump said.

The president-elect did not provide further details about how this would be possible.

Is the canal drying up?

In 2023, drought conditions in Central America affected the Panama Canal.

The canal relies on the nearby man-made Gatun Lake to operate its locks. Low water levels in the lake led the canal authorities to restrict the number of ships using the waterway and increase usage fees.

In the past fiscal year, the Panama Canal saw a 29 percent decrease in ships. Between October 2023 and September 2024, 9,944 traversed the canal, compared with 14,080 in the previous year.

Traffic on the canal has now returned to pre-drought levels. However, the fee for next year is expected to increase.

In his statement, Mulino said that “the tariffs are not set on a whim”, adding that the increased shipping fees will help to pay for improvements that the government of Panama has made to allow more ship traffic through the canal.

What has Trump suggested?

In advance of the November vote, Trump’s presidential campaign was built on the non-interventionist “America First” policy. However, he has suggested “territorial expansion” multiple times since winning the presidency, with the Panama Canal being one of the territories he has recently marked as a possibility.

Trump has also hinted at Canada. On December 18, he posted on TruthSocial: “Many Canadians want Canada to become the 51st State. They would save massively on taxes and military protection. I think it is a great idea. 51st State!!!”

It is unclear whether the president-elect was serious. His comments came amid flaring tensions between the US and Canada. After Trump recently threatened to impose tariffs on goods from their northern neighbour, Canadian Finance Minister Chrystia Freeland resigned and pressure intensified on Prime Minister Justin Trudeau to resign.

Trump has also expressed interest in Greenland, an autonomous territory of Denmark. On Monday, Trump announced on Truth Social that he has picked Ken Howery as the US ambassador to Denmark, adding to this post that: “the United States of America feels that the ownership and control of Greenland is an absolute necessity”.

Trump made this suggestion during his first term as well, but it was rebuffed by Danish authorities, with the Danish prime minister telling Danish media that Greenland is not for sale.

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