The US did not give up control of the Panama Canal lightly. 

“We built it. We paid for it. It’s ours!” These are not Donald Trump’s words, but those that Ronald Regan used in 1976 when he tried, in vain, to secure the Republican nomination. 

Back then, the public opinion split. Particularly among Republicans, the Canal was a source of national pride and a symbol of American achievements. To many, giving up its control was hard to swallow. 

Those feelings went relatively quiet after the Torrijos–Carter treaties were signed in 1977. Not without hiccups, including a military invasion in 1989, the Canal eventually changed hands in 1999 as planned. Panama upgraded it, turned it into a nexus of global trade and a cornerstone of the country’s sovereignty and economic growth. 

All smooth sailing (bar the recurrent corruption scandals) until the weather changed on January 20. In his inauguration speech, Mr Trump referred to the Torrijos–Carter treaties as “a foolish gift”. 

To add insult to injury, “China is operating the Panama Canal”, the president added before thundering: “We are taking it back”. 

If Mr Trump’s rhetoric evokes some of his Republican predecessors, his remarks about China signal a shift. Now forth, foreign trade and investment have to be filtered through the lens of the US’s national security. 

The White House is putting Panama in front of a binary option: side with Mr Trump, or face his wrath. 

No fear

It was only in 2017 when Panama established diplomatic relations with Beijing as it ditched ties with Taiwan. Soon afterward, Xi Jinping visited the Isthmus, giving his personal blessing to the country joining the Belt and Road Initiative (BRI). 

Back then, Mr Trump had just entered the White House. Although he championed a tougher stance on China, particularly on trade, he was still perceived as an outsider and struggled to make a dent. 

I happened to visit Panama at the time. Spirits were high. The local business community eyed new trade and investment opportunities; the government a way to derisk the country’s dependence on the US as its main commercial partner.

“I don’t fear any political price from establishing formal relations with China,” Panama’s then president Juan Carlos Varela told me in 2018. “Panama is a sovereign country and free to take its [own] decisions.”

The Chinese did try to make the most of this new season. At one point and under Trump 1.0’s watch, Beijing had secured government support for a new mega embassy on the Pacific mouth of the Canal, a deepwater port near the Atlantic edge of the Canal, and a fourth bridge over the Canal, while a Chinese contractor worked on a feasibility study for a train running all the way to the border with Costa Rica. All these projects derailed, with the exception of the bridge project, which is years behind schedule. 

“Today, China has no operational, strategic or political control of the Canal,” says Noel Maurer, an associate professor at the GW School of Business. 

Regardless of their success, China’s dealings in Panama projected the image of a country somewhat falling for the Chinese sirens. 

“We allowed ourselves to be seen as too friendly to China, while not having a specific foreign policy on it,” argues former Panamanian diplomat Nehemías Jaén. That ultimately ended up drawing Mr Trump’s attention. 

Binary security options 

In his first week back at the helm, Mr Trump made it clear that national security is the main axis of international relations with China and third countries, thus confirming an approach that emerged in the last years of the Biden administration. Anything else, from free trade and investment to multilateralism, has to be treated as subordinated to the national security agenda. 

These developments substantiate the idea of a “near security” approach that expands the domain of US national security beyond the domestic borders. Through this lens, the US is urging Panama to conform to its agenda towards China.  

Congress is on the same page. A senate resolution introduced by a group of senators led by Republican Eric Schmitt on January 25 has already urged the Panamanian government to “terminate” agreements that allow Chinese state-owned enterprises to manage strategic infrastructure, “including the Balboa and Cristobal” ports operated by Hong Kong-based Hutchison Ports Holdings as they threaten the “security of the Western Hemisphere". 

“The problem is that the concept of national security can be broad,” argues Enrique Dussel, a professor with the National Autonomous University of Mexico who developed the concept of near security. 

Panama’s southern neighbour Colombia came to terms with it on January 26, when the White House forced Gustavo Petro’s government to enable its deportation push by allowing the landing of planes carrying migrants, or face a 25% tariff on all Colombian goods entering the US. After a couple of hours, Mr Petro caved. 

When they signed the Torrijos–Carter treaties, then president Jimmy Carter said: “They mark the commitment of [the US] to the belief that fairness, and not force, should lie at the heart of our dealings with the nations of the world.” 

That no more. Economic coercion is the natural corollary of the new binary option the White House is offering countries in its neighbourhood. Force is back at the heart of the US foreign policy. Its first stop: Panama City via Bogotá.

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.