Trump’s Panama gambit: A new bargaining chip in China strategy?

US President-elect Donald Trump has sparked controversy by threatening to reassert US control over the Panama Canal while accusing China of exerting undue influence over the strategic waterway vital to global trade.

Trump’s rhetoric has prompted strong denials from both Panama and Beijing.

On Wednesday, Trump went on to allege Chinese military presence in the canal, prompting questions about whether his comments are part of a broader geopolitical gambit against China.

In a Truth Social Christmas Day post, Trump claimed that the "wonderful soldiers of China" are operating the canal "lovingly but illegally” – a claim vehemently denied by Panama and unsubstantiated by evidence.

“The United States puts in billions of dollars in ‘repair’ money but gets nothing [in return],” he claimed, accusing Panama of exploiting American generosity.

Panama’s President, Jose Raul Mulino rejected Trump’s claims as “nonsense,” asserting that there is “absolutely no Chinese interference” and “not a single Chinese soldier in the canal.”

Defending Panama’s sovereignty, Mulino stressed: "The canal is Panamanian and belongs to Panamanians. There's no possibility of opening any kind of conversation around this reality."

The Panama Canal, completed by the United States in 1914, has long been a strategic asset for global trade. However, its full control was transferred to Panama on December 31, 1999, under the 1977 Torrijos-Carter Treaties.

Panama has maintained its sovereignty over the canal since the early 2000s, with its administration governed by the Panama Canal Authority (ACP).

Critics argue that Trump may be leveraging Panama as one of the strategic bargaining chips in future trade negotiations with China.

“Panama is a sovereign nation. China is a sovereign nation. He's free to be unhappy with the growing ties between China and Latin America, but it would require some form of coercion to change matters, which is unlikely,” Josef Gregory Mahoney, a professor of politics and international relations at Shanghai-based East China Normal University, tells TRT World.

“Trump has alternated between saying aggressive and friendly things about China,” says the Shanghai-based American analyst, who keeps a close watch on China-US relations.

“On the one hand, he seems to be articulating red lines or positions he aims to assert in future negotiations on trade with Beijing. On the other hand, he probably dislikes the fact that China knows him so well given his previous dealings with Beijing. This might be unnerving to Trump, insomuch as he often tries to appear unpredictable in order to gain leverage in difficult relationships,” he explains.

Mahoney points out that Trump has also said provocative things about other sovereign nations in recent days, including promoting the idea of Canada being the 51st US state.

Strategic interests vs sovereignty

The implications of Trump’s declarations are profound, raising questions about his geopolitical priorities and the broader China-US rivalry.

China’s Foreign Ministry Spokesperson, Mao Ning, reiterated Beijing’s support for Panama’s sovereignty over the canal during a press conference earlier this week.

“The Panama Canal is a great creation of the people of Panama. China has always respected Panama’s sovereignty over the canal and recognised it as a permanently neutral international waterway,” Mao said.

“We believe the canal will continue to make new contributions to facilitating integration and exchanges between people of different countries and enhancing humanity’s well-being,” she added.

Trump’s recent remarks challenge this status quo, framing the canal as a “vital national asset” for the United States and hinting at potential intervention to “reclaim” its influence.

Mahoney counters Trump’s emphatic claims. "The Panama Canal is not a vital national asset of the US. First, it doesn't belong to the US, and second, it does not play a major strategic role in US commercial or military affairs,” he says.

The canal transits approximately six percent of global trade and any disruption to its operations would have far-reaching consequences. Unlike when the US controlled the canal and operated it to break even, the ACP runs it as a business, managing costs for maintenance and capital expenditures.

Unpacking Trump’s motives

Trump’s sudden focus on Panama raises critical questions about his intentions. Is this a genuine concern for US economic and national security, or is it a calculated move in the broader geopolitical rivalry with China?

Or, “did some shipping magnate whisper in Trump’s ear?,” as the Wall Street Journal asked in a recent editorial.

While Trump is known to cater to the business interests of his allies and associates, it remains unclear which American or foreign shipping companies, or others with stakes in the Panama Canal, have ties to him.

Trump’s allegations seem designed to stoke fears of Beijing’s growing influence in Latin America through significant commercial investments and infrastructure projects near the canal.

Chinese companies have secured contracts for various projects, including port operations on both ends of the canal and water management initiatives. For instance, the Chinese firm Hutchison Whampoa has been involved in port operations in Panama. Additionally, China has invested in logistics parks and other infrastructure developments in the vicinity.

These investments have raised concerns among US officials about potential strategic implications. In March 2022, General Laura Richardson, head of US Southern Command, expressed apprehension over China's expanding footprint in the region, particularly near the Panama Canal.

Critics argue that Trump’s rhetoric risks undermining Panama’s sovereignty and destabilising a region already grappling with challenges like illegal migration, drug trafficking, and organised crime. Moreover, his threats to “reclaim” control of the canal echo colonial-era attitudes that many Latin American nations have sought to leave behind.

Trump’s comments are a microcosm of the intensifying China-US rivalry, where strategic chokepoints like the Panama Canal become symbolic battlegrounds. While China’s Belt and Road Initiative (BRI) has extended its reach across Latin America, the United States remains wary of losing influence in its “backyard,” as highlighted by several media reports during Chinese President Xi Jinping’s Peru visit last month.

By framing the canal issue as a matter of national security, Trump appears to be rallying domestic support and signalling to allies about his administration’s tough stance on China, according to Mahoney.

However, analysts say, this approach risks alienating key partners in the region and could further complicate China-US relations.

Mahoney points out that the US foreign policy on China remains confrontational and it doesn’t matter who is in the driver’s seat.

“There’s a school of thought that says US foreign policy doesn’t vary much from one president to the next despite clear differences in style.”

“We already saw President Joe Biden adopting an interventionist approach towards Brazil's consideration of joining China's BRI. Trump and Republicans have proclaimed him a man of peace, but in fact, he set the table for America’s containment policies against China,” Mahoney says.

“So we’ll have to wait and see whether Trump will continue Biden’s interventionism or simply give us more of the same of his own interventionist-oriented first term in office.”