So, Donald Trump is talking about the Panama Canal again. Honestly, it feels like a bit of a throwback to the 1970s, but here we are in 2026, and the "take back the canal" rhetoric has moved from campaign trail banter to actual inaugural declarations. On January 20, 2025, during his second inauguration, he didn't mince words. He called the 1977 treaty a "foolish gift" and basically told the world that the U.S. is "taking it back."
It’s easy to dismiss this as just another headline-grabbing comment, but if you've been following the tension in Latin America lately, it’s kinda getting serious. People are worried. The Panamanian government isn't just sitting there; they’re actively pushing back. This isn't just about a strip of water; it’s about global trade, old scars from the 1989 invasion, and a massive tug-of-war with China.
What Really Happened with the Panama Canal?
To understand why Trump is so fired up, you've gotta look at what he's actually saying. He has three main gripes. First, he claims American ships are being "severely overcharged." Second, he’s convinced China is secretly running the show. Third, he thinks the original deal—the Torrijos-Carter Treaty signed by Jimmy Carter—was a total "rip-off" of American taxpayers.
Is he right? Well, it’s complicated.
Take the money part. Panama has actually been a pretty good steward of the canal since they took over on December 31, 1999. In the 26 years since the handover, they’ve funneled over $31 billion into their national treasury. For a small country, that’s huge. But for the U.S., the "overcharging" claim mostly stems from the fact that Panama uses market-based pricing. When there's a drought—like the brutal one in 2023 and 2024—the water levels in Gatun Lake drop.
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When water is low, they have to restrict the number of ships. To manage the line, they auction off slots. Some companies have paid millions just to skip the wait. Trump sees this as a violation of "fairness," but the Panama Canal Authority (ACP) says it’s just supply and demand. If the U.S. Navy or a Texas LNG tanker wants to jump the line, they have to pay the same premium as anyone else.
The China Factor: Fact vs. Fiction
Then there's the China thing. This is usually what gets the most traction in Washington. Trump has said that "China is operating the Panama Canal."
Here is the reality: a Hong Kong-based company called CK Hutchison Holdings has been running the ports at both ends of the canal—Balboa and Cristóbal—since the late 90s. They don't run the locks. They don't decide which ships go through. They just handle the containers at the docks.
Recently, there’s been a massive twist. An American investment giant, BlackRock, has been moving to buy a controlling stake in the company that operates those ports. You’d think that would calm things down, but the legal battle in Panama’s Supreme Court is still messy. Critics in Panama say the original port concessions were illegal and cost the country billions in lost revenue. Trump is using this friction to argue that the U.S. needs to step back in to "ensure security."
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Why Taking it Back Isn't as Simple as a Signature
Look, you can’t just "undo" a treaty that was ratified by a two-thirds majority of the U.S. Senate. That’s not how international law works. The Torrijos-Carter Treaties actually consist of two parts.
- The Panama Canal Treaty: This is the one that handed over the keys in 1999. It’s done. Finished.
- The Neutrality Treaty: This one is the "forever" clause. It says the canal must remain neutral and open to all nations. Crucially, it gives the U.S. the permanent right to use military force to defend that neutrality.
So, the U.S. already has the legal right to step in if, say, a hostile power tried to shut the canal down. But "taking it back" for ownership? That would mean violating a sovereign treaty. Panama’s President, José Raúl Mulino, has been very clear: "The Canal is and will continue to be Panamanian." He’s even rejected the idea of opening a conversation about it.
It’s a high-stakes game of chicken. If the U.S. actually tried to seize the canal, it would likely set off riots across Latin America. We’re talking about a region that still remembers the "Zonians"—the Americans who lived in a literal colony in the middle of Panama for nearly a century. Reopening those wounds would probably drive Panama—and the rest of the neighborhood—right into China’s arms.
The Economic Reality of 2026
If you’re wondering why this matters for your wallet, look at the numbers. About 40% of all U.S. container traffic passes through that canal. We’re talking about $270 billion in cargo every year. If there’s even a hint of military conflict or a "takeover," insurance rates for shipping would skyrocket.
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We already saw a preview of this during the recent El Niño drought. When transit slowed down, the price of dry bulk goods like grain and coal went up by 14%. If the U.S. tries to forcibly change the management of the canal, those "ridiculous fees" Trump talks about might seem like a bargain compared to the cost of a global trade war.
What Happens Next?
So, where do we go from here? Trump isn't known for backing down, but Panama isn't budging either.
Keep an eye on the Panama Supreme Court. They are expected to rule any day now on the legality of those port contracts. If they cancel the Chinese-linked licenses, it might give Trump a "win" without him having to actually invade. He could claim credit for "kicking China out" while leaving the canal in Panamanian hands.
Another thing to watch is the Darien Gap. Panama has been helping the U.S. try to slow down the flow of migrants heading north. President Mulino has hinted that if the U.S. gets too aggressive about the canal, that cooperation might just disappear. It’s a classic case of leverage.
Practical Steps to Follow This Story:
- Monitor the Baltic Dry Index: This is a key indicator of shipping costs. If it spikes, the market is getting nervous about the canal.
- Watch the BlackRock Acquisition: If the deal for the ports goes through, it might de-escalate the "China is in control" narrative.
- Track Diplomatic Statements: Look for comments from Marco Rubio (the Secretary of State) or Pete Hegseth. They’ve been echoing the "security threat" line but often use more measured language than the President.
Basically, don't expect a U.S. flag to be flying over the Miraflores Locks tomorrow. But do expect a lot of "America First" pressure on the Panamanian government to give the U.S. preferential treatment. Whether that's actually possible under a neutrality treaty is the multi-billion dollar question.