The Panama Canal is basically the world's most expensive shortcut. For over a century, it has dictated how global trade flows, moving everything from iPhones to liquefied natural gas between the Atlantic and Pacific. But when you mix the geopolitics of this massive ditch with a figure like Donald Trump, things get... complicated. Honestly, it’s one of those topics where people remember the headlines but usually forget the actual policy shifts or the tension that brewed behind the scenes during his administration.
Donald Trump's relationship with the Panama Canal isn't just about one single event. It's a mix of historical grievances, trade wars with China, and the specific brand of "America First" diplomacy that defined his four years in office.
That Time Trump Suggested We Should’ve Kept the Canal
You probably remember the rhetoric. During his 2016 campaign and at various points in his presidency, Trump echoed a sentiment that many older Americans still hold: that the U.S. "gave away" the Panama Canal for nothing. He was referring, of course, to the Torrijos-Carter Treaties signed back in 1977, which officially handed over control to Panama on December 31, 1999.
It’s a classic piece of Americana nostalgia.
Trump often framed the handover as a strategic blunder. In his view, the U.S. built it, paid for it in blood and sweat (and thousands of lives lost to yellow fever), and then just handed the keys over. While he didn't actually try to "take it back"—which would have been an international law nightmare—the rhetoric served a very specific purpose. It signaled to the world that his administration viewed strategic assets through a lens of ownership and leverage, not just cooperative globalism.
The China Factor: The Real Battle for Influence
While the "we should've kept it" talk was mostly for the base, the real drama was happening in the boardrooms and diplomatic cables. This is where the Donald Trump Panama Canal saga gets genuinely interesting.
Under the Trump administration, the U.S. grew increasingly paranoid—perhaps rightfully so—about China's footprint in Panama. Shortly after Trump took office, Panama dropped its diplomatic recognition of Taiwan in favor of Beijing. This was a massive shift. Suddenly, Chinese state-owned enterprises were bidding on massive infrastructure projects right at the mouth of the canal.
The Trump White House didn't take this sitting down.
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Secretary of State Mike Pompeo actually visited Panama in 2018 and issued a pretty blunt warning to the Panamanian government. He basically told them to watch out for "predatory" Chinese investment. The message was clear: if you let China get too close to the canal, there will be consequences for the U.S.-Panama relationship. This wasn't just talk. The U.S. used its diplomatic weight to push back against several Chinese-backed projects, including a proposed bridge over the canal and a massive cruise ship terminal.
It was a tug-of-war. On one side, you had China offering cheap credit and big dreams. On the other, you had the Trump administration reminding Panama that the U.S. is still their largest trading partner and the primary user of the canal.
How the Trade War Hit the Water
Then there was the trade war itself. Because Trump’s policies focused so heavily on tariffs and rebalancing trade with China, the canal's traffic patterns actually felt the ripple effects.
Think about it. The Panama Canal lives and breathes on the volume of goods moving between the U.S. East Coast and Asia. When the Trump administration slapped tariffs on Chinese goods, and China retaliated with tariffs on U.S. agricultural products and Liquefied Natural Gas (LNG), the ships started changing their routes.
For a while, U.S. LNG exports—one of the biggest growth sectors for the canal's "Neopanamax" locks—took a hit. If China wasn't buying American gas, those massive tankers didn't need to pass through Panama. It was a direct example of how "America First" economics could, in the short term, actually hurt the bottom line of a strategic partner like Panama.
The Infrastructure Obsession
Trump, the builder. He loves big projects.
He often spoke about the Panama Canal's expansion (completed in 2016, just before he took office) as a benchmark for what the U.S. should be doing at home. He used it as a "why can't we do this?" example for American infrastructure. He’d point to the efficiency of the Panamanian project—which, to be fair, had its own massive cost overruns and delays—as a contrast to the bureaucratic red tape in the U.S.
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But there’s a weird irony here. While he praised the engineering, his administration’s focus on tightening borders and renegotiating trade deals created a sense of uncertainty for the canal's future planners. The Panama Canal Authority (ACP) has to plan decades in advance. They need to know if the U.S. is going to remain a globalized trade powerhouse or move toward isolationism.
Under Trump, that answer was never quite clear.
Water Security and the Climate Controversy
Here’s something people rarely talk about: the water. The Panama Canal doesn't use seawater; it uses fresh water from Gatun Lake. If it doesn't rain, the ships can't sail.
During the Trump years, Panama started seeing severe droughts that forced the canal to implement "draft restrictions." This means big ships had to carry less cargo so they wouldn't hit the bottom. While the Trump administration was pulling out of the Paris Agreement and downplaying climate change, the very canal they considered a strategic priority was struggling with the reality of a changing climate.
It created a bizarre disconnect. You had U.S. officials pushing for more trade and more "energy dominance," while the physical path for that energy—the canal—was literally drying up.
What Most People Get Wrong About This Relationship
A lot of folks think Trump was "anti-Panama." That's not really true. It was more about the "Great Power Competition."
The U.S. actually maintained a pretty solid security relationship with Panama during this time. We’re talking about drug interdiction, maritime security, and border control. The Trump administration actually liked Panama’s willingness to help stop migration flows coming up through the Darien Gap.
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The friction wasn't about Panama itself; it was about who Panama was "dating." Trump’s team acted like a jealous ex-boyfriend whenever Beijing showed up with a bouquet of infrastructure loans.
- The "Neutrality" Myth: People think the U.S. has no say in the canal anymore. False. Under the Neutrality Treaty, the U.S. maintains the right to use military force to defend the canal if its accessibility is threatened. The Trump administration made it very clear they still viewed this as a "red line."
- Economic Leverage: Some thought Trump's tariffs would ruin the canal. They didn't. Trade is like water; it finds a way. When U.S.-China trade dipped, trade between the U.S. and Southeast Asia (Vietnam, Thailand) often picked up the slack, still using the canal.
- The Personal Connection: Trump actually had business interests in Panama for years (the former Trump Ocean Club, which had its own messy legal exit). This gave him a weirdly specific, if somewhat biased, view of the country’s legal and business climate.
The Legacy of the "America First" Canal Policy
So, what’s the takeaway?
The Trump era changed the Panama Canal from a "settled" piece of history into a frontline of the new Cold War. Before 2016, we kind of took the canal for granted. It was just there. After Trump, it became a symbol of the struggle to keep Chinese influence out of the Western Hemisphere.
Even after he left office, the "Trump effect" remained. The Biden administration hasn't exactly gone back to the old way of doing things; they’ve kept up the pressure on Panama to be wary of Chinese tech and port investments. In a way, Trump’s "loud" diplomacy set the stage for the "quiet" competition we see now.
Panama is currently facing a massive crisis. Not a political one, but a hydrological one. Gatun Lake is at record lows. The canal is throttling traffic. And while the world watches to see if the U.S. will help with new engineering solutions, the ghost of the "America First" policy still lingers. Will the U.S. invest in the canal's future, or will we let another power—like China—offer the billions needed for new dams and water piping?
Actionable Insights for Following This Story
If you're watching the news for updates on the Panama Canal and how U.S. politics affects it, keep your eyes on these specific markers:
- The Neopanamax Tolls: Watch if the canal starts changing its pricing for U.S. grain and gas. This is the first sign of economic tension.
- Port Concessions: Look at who is winning the contracts for the ports at Balboa and Cristóbal. If a Chinese firm wins a 25-year lease, expect the U.S. (under any administration) to lose its mind.
- The Darien Gap Factor: Panama uses its cooperation on migration as a bargaining chip. When the U.S. gets tough on the canal, Panama often gets "relaxed" about the border. It's a delicate dance.
- Infrastructure Tenders: Panama is looking at a $2 billion water management project. Whoever wins that—whether it's the U.S. Army Corps of Engineers or a private Chinese firm—will tell you everything you need to know about who "owns" the influence in the region.
The canal is more than just a shortcut. It's a barometer for American power in our own backyard. Whether you loved or hated the Trump approach, he forced everyone to realize that the 1977 "handover" wasn't the end of the story—it was just the beginning of a different, more complicated chapter.