You’ve probably heard the rumblings. For the last couple of years, but especially since his second inauguration in January 2025, Donald Trump has been laser-focused on a 50-mile stretch of water that most Americans haven't thought about since middle school social studies. We’re talking about the Panama Canal.
Honestly, it’s a bit of a wild situation.
Trump has called the 1977 treaty that handed over the canal a "foolish gift." He’s claimed that China is basically running the show down there. He’s even hinted—pretty strongly—that he wouldn't rule out using "military force" to take it back if he feels U.S. national security is at risk.
But what’s the actual reality on the ground in 2026? Is China really pulling the levers? Are we about to see a "Rough Riders" sequel in Central America? Let’s break down the noise from the facts.
The China Factor: Ports, Politics, and BlackRock
The biggest point of contention for the Trump administration has been Chinese influence. For years, the narrative was that China "controlled" the canal because a Hong Kong-based company, CK Hutchison Holdings, operated the ports at both the Atlantic and Pacific entrances.
Trump hasn't been shy about this. In his 2025 inaugural address, he flat-out stated, "China is operating the Panama Canal... and we’re taking it back."
Here’s where things get interesting. Last year, under intense pressure from the U.S., a massive deal went down. The U.S. investment giant BlackRock stepped in to buy a controlling stake in the ports operated by Hutchison. Essentially, the "Chinese backdoor" that Secretary of State Marco Rubio warned about was swapped for a Wall Street front door.
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Yet, the tension hasn't totally evaporated. Even with BlackRock in the mix, Panama is still walking a tightrope. China is the canal's second-largest user. They’ve invested in everything from a fourth bridge over the canal to cruise terminals.
Trump’s "Americas First" policy has basically forced Panama to choose. Early in 2025, Panama officially withdrew from China’s Belt and Road Initiative. It was a huge signal. Panama is leaning back toward Washington, but it's doing so with a wary eye on its own sovereignty.
The "One Dollar" Myth and the Torrijos-Carter Treaty
One of Trump’s favorite talking points is that Jimmy Carter sold the canal for "one dollar."
It makes for a great headline, but it's a bit more complicated than that. The 1977 Torrijos-Carter Treaties didn't just "sell" the canal. They established a 20-year transition period where the U.S. gradually handed over operations, culminating on December 31, 1999.
The U.S. didn't get a check for a buck. Instead, it got decades of stability and a neutral waterway. However, the Trump administration argues that the "neutrality" part has been broken because U.S. ships are being "overcharged" and "treated unfairly."
Is that true? Well, if you ask the Panama Canal Authority (ACP), they’ll tell you the prices are the prices. Everyone pays the same market rate. But when a drought hits—like the massive one we saw in 2023 and 2024—prices spike.
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Trump’s argument is that because the U.S. built the thing with "American lives and treasure," we should get a better deal. It’s a fundamental clash of philosophies: the U.S. sees it as a "vital national asset," while the rest of the world sees it as a neutral international utility.
Climate Change and the $8 Billion Gamble
While the politicians in D.C. and Panama City are arguing over treaties, the canal itself is facing a much bigger enemy: lack of water.
The canal isn't at sea level. It’s basically a water bridge that uses gravity to move ships. Every time a ship goes through, it uses about 50 million gallons of fresh water from Gatun Lake. If it doesn't rain, the lake dries up, and the ships can't pass.
As of January 2026, the ACP is moving forward with some massive, "mega-infrastructure" projects. They’re planning to spend over $8 billion through 2035. The centerpiece? A new reservoir on the Río Indio.
- The Río Indio Reservoir: A $1.6 billion project to dam a river and tunnel water into Gatun Lake.
- The "Dry Canal": A $1.78 billion logistics corridor to move cargo by rail and road when water levels are too low for big ships.
- Energy Corridor: A 76-km pipeline to move LPG (liquefied petroleum gas) between the oceans.
These aren't just "nice to have" updates. They are survival tactics. If the canal can't guarantee transit, shipping companies will—and already are—rerouting around the Cape of Good Hope or through the Suez (though that has its own drama).
Why This Matters for Your Wallet
You might think, "I don't own a cargo ship, why do I care?"
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The Panama Canal handles about 5% of all global trade. More importantly, about 40% of all U.S. container traffic goes through those locks. When the canal gets bottlenecked or when fees go up, the price of your sneakers, your laptop, and your avocados goes up, too.
Trump’s threat to "take it back" isn't just about nostalgia for the days of Teddy Roosevelt. It’s about controlling the cost of living in Middle America. If the U.S. can force lower transit fees for American goods, it’s a win for the "America First" economic agenda.
But there’s a risk. If the U.S. actually tried to seize the canal, it would likely tank relations with every single country in Latin America. It would be seen as a return to "Gunboat Diplomacy."
What to Expect Next
The situation is fluid, literally and figuratively. Here is what we are watching as we move through 2026:
- The Supreme Court of Panama: There are ongoing legal battles over the port concessions. If Panama’s courts rule against the current contracts, it could trigger a "state takeover" of the ports, which Trump would likely use as an excuse to intervene further.
- The Río Indio Tenders: Keep an eye on who wins the contracts for the new reservoir. If U.S. firms aren't involved, expect the rhetoric from the White House to heat up.
- The Military Question: While "military force" is on the table in speeches, the current focus is on "security coordination." Defense Secretary Pete Hegseth has already been to Panama to talk about joint security. It’s a "soft" presence for now.
Actionable Insights for the Savvy Observer:
- Watch the Surcharges: If you’re in the import/export business, keep a close eye on the ACP’s "freshwater surcharge." It’s a better indicator of the canal’s health than any political speech.
- Diversify Logistics: Don’t rely 100% on the canal. The "Dry Canal" and West Coast port expansions are becoming increasingly vital as climate-related disruptions become the "new normal."
- Follow the Ports: The BlackRock deal was a major move. Watch for more "Westernization" of infrastructure in the region as the U.S. tries to box out Chinese state-owned enterprises.
The Panama Canal isn't just a relic of history. It’s a high-stakes poker game where the players are the world's two biggest superpowers, and the pot is the future of global trade. Whether Trump "takes it back" or simply squeezes it until it aligns with U.S. interests, the era of "neutral" management is clearly over.