Trump's Panama canal claim ignites US‑China strategic tensions
Donald Trump announced that the US would "take back" the Panama Canal. During his inauguration, he spoke about the breach of trust by Panama and mentioned China, which he believes holds influence over this crucial maritime route. "There is fear that sabotage could occur," assessed Dr Michał Bogusz from the Centre for Eastern Studies.
The Panama Canal is one of the most vital maritime routes globally, utilised by 170 countries. It connects to 180 other shipping routes, allowing access to over 1,900 ports. According to official figures, the United States accounts for nearly 75% (176 million tonnes) of cargo traffic through the canal, with China in second place (21.4%, 50 million tonnes). Japan follows in third place with 14.6%.
In 2018 alone, 487 million tonnes of goods were transported through the Panama Canal, and forecasts suggest it will reach 573 million tonnes this year. Meanwhile, revenue from this route will reach 5.62 billion balboa (Panama's currency, approximately £18.93 billion).
-"Panama breached our trust, violated the spirit of our cooperation because American ships are subject to enormous fees. This shouldn’t be the case, and besides, Chinese ships are navigating the Panama Canal without our consent. We will reclaim the Panama Canal," Donald Trump declared right after his inauguration.
What China has to do with the Panama Canal
The 80-kilometre crossing connecting the Pacific and Atlantic Oceans was constructed over 100 years ago by Americans. However, the profits generated by this waterway are received by Panamanians, and the United States guaranteed its neutrality and control over the territory on both sides. However, in 1977, President Jimmy Carter signed treaties with Panama's dictator, Omar Torrijos, to transfer control of the canal by the close of 1999. Washington, nonetheless, retained the right to defend the route if its neutrality was jeopardised. In this context, Trump refers to China.
In reality, the Panama Canal consists of two canals leading to an artificial lake through which ships pass. The port operators at both ends are managed by the private company CK Hutchison Holdings based in Hong Kong. It’s a large-scale operation, explains Dr Michał Bogusz, a chief specialist of the Chinese Team at OWS.
According to bairdmaritime.com, Hutchison Ports is the largest investor, developer, and operator in the world, with operations at 53 ports across 24 countries in Asia, the Middle East, Africa, Europe, the Americas, and Australasia. The founder of Hutchison is the 96-year-old Li Ka-shing, one of the wealthiest Asians, with a fortune estimated at £28.54 billion. The businessman holds both Chinese and Canadian citizenship.
The chairman of the board and manager of the company is his son Victor Li, who was kidnapped in 1996 by a Hong Kong triad. His father paid the ransom, the gangsters released him, and the investigation was not reported to Hong Kong police as Chinese security services took over. The perpetrators were caught, taken to China, and executed there. The family owes a debt of gratitude to Chinese security, though it remains unclear why the kidnapping occurred and what precisely transpired. Various theories could suggest whether the Chinese themselves were involved in the abduction. This raises suspicions, and in this context, Trump poses legitimate questions, explains Dr Bogusz.
However, the Panamanian government rejects these accusations. President José Raúl Mulino emphasizes, "The Canal was, is, and will remain Panama's property, and its administration will continue to be conducted by Panama, respecting its neutrality permanently."
According to a report published by IDB Invest, revenues from the Canal generate nearly 8% of Panama's GDP. Additionally, 55,000 people are employed directly and indirectly with the crossing. The Atlantic Council think tank notes that Washington is a significant economic partner of Panama, accounting for £2.96 billion annually in direct foreign investments. "The United States can influence decision-making in Panama," it reads.
Despite Mulino’s assurances of independence, on the day of Trump's inauguration, Panamanian authorities began an audit of the port operator CK Hutchison Holdings.
- If they want to find something, they will. The question is whether Trump intimidated them sufficiently for them to wish to remove the Chinese from managing the Canal themselves. Trump's security concerns stem from the operator's knowledge of what, where, and when goods are flowing. It opens the field for sabotage. Imagine a fleet sailing to the Pacific to engage in battles around Taiwan, and there's a malfunction, for instance, at a lock gate, and the workers "lost the key to the gates" - the expert explains.
In this context, Dr Bogusz recalls the German communists in 1920 during the Polish-Soviet War organising strikes that blocked ammunition transport to Poland.
- That’s why the port in Gdynia had to be constructed, and Poland demanded a facility on Westerplatte, to have its own military depot. The question is whether a similar incident could occur at the Panama Canal. If there were a confrontation between the US and China, it would mean that the conflict involves the country that built the Canal with the nation managing it in a third country, namely Panama. At the same time, the crossing itself is strategic for Americans, adds the analyst.
In a similar tone, Greg Curley, a United States Marine Corps fellow at the Atlantic Council's Scowcroft Centre for Strategy and Security, commented for the Atlantic Council. "Washington cannot afford to overlook China's growing influence, especially considering the strategic significance of the canal in the US-China rivalry - China is its second-largest client. Trump's statements are likely aimed at pressuring Panama on transit customs tariffs, warning Panama of increased dependency and collaboration with China, and demonstrating the US's determination," wrote Curley.
Beijing talks with Moscow
The Chinese are not taking drastic actions at present and are closely monitoring the Republican's decisions. There are reports that Trump will travel to Beijing to meet with the Chairman of the People's Republic of China, Xi Jinping, during the first 100 days of his administration.
- Beijing was relieved that Trump did not impose high tariffs on his first day of office. The Panama Canal was temporarily sidelined, but in my view, it's premature optimism. It is no coincidence that Trump unblocked TikTok for 75 days, not 90 days, as he could have. During this time, Beijing is expected to find a resolution to the issue with the app that will satisfy Washington. Concurrently, Trump is making demands and is already charting an agenda for a potential meeting. And Beijing is already preparing. After Trump's inauguration, the People's Daily reported that Xi Jinping conversed with Vladimir Putin. Both leaders have already begun coordinating their decisions regarding Trump - Dr Bogusz concludes.
Piotr Bera
