Who owns the Panama Canal and what does Trump want with it?

A cargo vessel passes through the Agua Clara locks of the Panama Canal. Photo credit: Matias Delacroix/AP

The president-elect of the United States has warned about reclaiming control of the canal due to what he describes as "excessive" fees. However, the leader of Panama has dismissed these allegations.

Donald Trump has made statements about the possibility of seizing control of the Panama Canal. But what exactly is the canal, and what makes it so vital?

Here’s the information you should be aware of.

Understanding The Panama Canal

The canal serves as an important route linking the Atlantic and Pacific oceans, enabling sailors to bypass an extra 7,000 nautical miles (13,000 kilometers) that they would otherwise have to travel around the southern tip of South America.

The 51-mile (82 km) canal runs through the heart of Panama, a nation situated on the narrow land that connects Central and South America.

In the year ending September 30, nearly 10,000 vessels navigated the canal, transporting 423 million tons of cargo, which included food, minerals, and manufactured items. Over 40% of the consumer goods exchanged last year between northeastern Asia and the east coast of the United States were moved via this canal.

The United States is the largest user of the canal, accounting for roughly 75% of the goods transported through it annually, with China following as the second largest user.

Who Is The Canal's Owner?

For the past 25 years, the Panama Canal has been managed and run by the Panama Canal Authority, an agency set up by the government of Panama.

In the 20th century, the United States managed the canal after gaining control of the surrounding area. This control began in 1904 when the US assisted Panama in gaining independence from Colombia. The canal was inaugurated in 1914, transforming international trade by enabling thousands of cargo ships and American warships to traverse its waters annually.

The United States' dominance over the canal and the disregard for the Panamanian people led to growing friction between the locals and American visitors. In response to these tensions, officials decided to build a wall separating Panama City from the canal zone during the 1950s.

On January 9, 1964, a significant protest erupted, resulting in the deaths of 28 individuals due to the government's crackdown, which drew widespread international condemnation and led US strategists to rethink their involvement with the canal. By 1977, US President Jimmy Carter and Panamanian leader Omar Torrijos signed two agreements aimed at gradually ending American control over the canal.

Following a time of shared management, which was interrupted by the US invasion in 1989 aimed at removing the military ruler Manuel Noriega, Panama regained complete control of the canal in 1999.

What Does Trump Aim To Achieve?

Trump has insisted that Panama should hand back control of the canal to the US unless it oversees the waterway in a way that meets his standards.

The president-elect of the United States criticized what he called the "outrageously high" fees that the federal government, the navy, and companies had to pay for access to the route.

"The costs imposed by Panama are outrageous," he stated. "This total 'scam' against our nation will be addressed right away."

Vessels navigating the canal are required to pay fees determined by the canal authority. In recent years, these rates have increased significantly due to droughts intensified by climate change, which deplete vital water supplies and limit the canal's capacity.

Due to a serious drought at the end of 2023, only 22 vessels passed through the canal daily, significantly down from the typical 36. This situation led to ships waiting in line for weeks or opting to pay up to $4 million (£3.2 million) to move ahead in the queue. As a result, the number of transits dropped by almost a third compared to the previous year by this September.

The canal authority has permitted a higher number of vessels to navigate the canal throughout 2024, which will help reduce congestion. However, they plan to raise fees and implement some new charges starting January 1, 2025. Panama's president, José Raúl Mulino, stated that the canal's transit fees are not excessive.

Trump cautioned that he wouldn’t allow the canal to be taken over by undesirable parties, indicating that China might be trying to gain a foothold there. A company from Hong Kong manages two of the five ports located near the canal, with one on each side. However, Mulino asserted that Panama maintains complete control over the canal itself.

"In a video statement released on Sunday, he emphasized that every square meter of the Panama Canal and its surrounding areas belongs to Panama and will always remain so."

Further contributions from Drew Reed, Edward Helmore, and Jonathan Yerushalmy.

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