Does China run the Panama Canal as Trump says?

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

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

The 51-mile (82 km) Panama Canal passes 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 on the Central American country and its transoceanic canal.

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

At the time, Panamanian President Jose Raul Molino described this claim as “nonsense,” stressing that there was “absolutely no Chinese interference” in the canal.

Trump also threatened to retake the canal by force, citing the “exorbitant” fees allegedly imposed on US ships to pass through it – another claim rejected by Panamanian authorities.

After Trump's inaugural address, President Molyneux reiterated that “there is no country in the world interfering in our management” of the Panama Canal.

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

However, Trump's inaccurate claim reflects concerns from some US officials about China's significant investment in the canal and surrounding infrastructure.

Historically, the United States has played a pivotal role in building and managing the corridor linking the Atlantic and Pacific oceans.

After a failed attempt by the French to build it, the United States obtained the rights to implement the project. The canal was completed in 1914.

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

Since 1999, the Panama Canal Authority has exclusively controlled waterway operations.

Treaties signed by both the United States and Panama stipulate that Panama will remain permanently neutral, but the United States reserves the right to defend any threat to the neutrality of the canal with military force under this deal.

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

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

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

Two of the five ports adjacent to the canal, Balboa and Cristobal, which lie 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 publicly listed CK Hutchison Holdings, a Hong Kong-based conglomerate founded by Hong Kong businessman Li Ka-shing. It has port operations in 24 countries, including the United Kingdom.

It has port operations in 24 countries, including the United Kingdom.

Although it is not state-owned in China, says Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies, there are concerns in Washington about how much control Beijing could exercise over the company.

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

“There is increasing geopolitical tension of an economic nature between the United States and China,” Berg says. “This kind of information about the goods will be very useful in the event of a supply chain war.”

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

Bids to operate those ports have faced almost no competition, according to Andrew Thomas, a University of Akron professor who wrote a book about the canal. “The United States at the time didn't really care about these ports, and Hutchison faced no objection,” he says.

Chinese companies, both private and state-owned, have also strengthened their presence in Panama with billions of dollars in investments, including a cruise terminal and a bridge to be built over the canal.

He asserts that the “package of Chinese activities,” as Thomas described it, may have prompted Trump to assert that the canal is “owned” by China, but that operating those ports does not equate to ownership.

Beijing has repeatedly said that China's relations with Latin America are characterized by “equality, mutual benefit, innovation, openness and benefits for the people.”

Panama's strategic location means that China has been vying to increase its influence in the country for years and expand its presence on the continent traditionally considered the United States' “backyard.”

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

Months later, Panama became the first Latin American country to join China's signature Belt and Road Initiative, a trillion-dollar global infrastructure and investment initiative.

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

China has slowly expanded its soft power by opening the country's first Confucius Institute and providing a grant for railway construction. Chinese companies have also sponsored “media training” for Panamanian journalists.