The construction of the 82-kilometer Panama Canal, which connects the Pacific and Atlantic Oceans, was initiated by the King of Spain in the 16th century, but later realized by U.S. President Theodore Roosevelt. It has been a major driver of global trade progress. Based on the 1977 agreement between the United States and Panama, full control of the canal was handed over to Panama in 1999. However, Donald Trump recently threatened to take back control of the canal, citing high transit tariffs and increasing China’s influence in the region, which he considers unfair and potentially disruptive to global geopolitical balance.
Panamanian President José Raúl Mulino firmly rejected Trump’s threat to take back control of the Panama Canal. In a video posted on X, Mulino stated that every square meter of the Panama Canal and its surrounding area belongs to Panama and will remain so. Mulino also emphasized that the tariffs imposed by Panama are set publicly and transparently, considering market conditions, international competition, operational costs, and maintenance needs. The Panama Canal is professionally managed by the Panama Canal Authority (Autoridad del Canal de Panamá – ACP).
Strategic trade aspects
- Strategic location: The canal saves ships from long and dangerous journey around the southern tip of South America, reducing travel by up to 7,000 nautical miles.
- Trade volume: In fiscal year 2024, the canal registered 9,944 transits and transported over 423 million tons of cargo, including essential goods like food, minerals, and industrial products.
- Economic impact: The canal handles approximately $270 billion worth of cargo annually, making up about 40 percent of all U.S. container traffic.
- Efficiency improvements: Recent operational improvements have reduced vessel wait times and transit times, enhancing the canal’s reliability and sustainability.
- Global connectivity: The canal connects several crucial international trade corridors, including the East Coast of the U.S. to Asia and the East Coast to Latin America.
The value of U.S. trade passing through the Panama Canal has sharply increased over the past 30 years, from $150 billion (1995) to around $450 billion today. The canal is crucial for the United States, especially for commodity traffic from the East Coast to Asia. China’s trade value in 1995 was only about $100 million, but by 2024 it had reached $1.3 billion. Although it seems like a David and Goliath comparison, for the United States, China’s increasing participation is a potential geopolitical and geostrategic threat.
Strategic energy traffic value
- U.S. LNG exports: The Panama Canal is a crucial route for U.S. LNG exports to Asia. The expanded canal can accommodate 90 percent of the world’s current LNG tankers, significantly reducing travel time and transportation costs. For example, a transit from the U.S. Gulf Coast to Japan via the Panama Canal takes about 20 days, compared to 34 days if ships go around the southern tip of Africa.
- Impact of restrictions: Recently, the Panama Canal authorities imposed restrictions on vessel traffic due to a severe drought, reducing the number of LNG cargoes passing through the canal. Normally, a cargo of LNG passes through the canal every day, but now only three to four are allowed each month. This has led to increased congestion and longer travel times for LNG shipments.
- LPG and ethane: In addition to LNG, the Panama Canal also sees significant traffic of LPG (liquefied petroleum gas) and ethane. U.S. LPG exports via the canal have increased, with January 2024 seeing a 12 percent rise in LPG transit volumes compared to December 2023.
Transit tarif
Trump pointed to significant tariff increases through the canal that could affect the U.S. export-import economy passing through the Panama Canal. Here is a table summarizing some illustrative toll rates for various types of vessels using the Panama Canal, including adjustments made after the expansion in 2016:
| Vessel Type | Measurement Basis | Original Locks (Pre-2016) | Expanded Locks (Post-2016) | Current Range (2024) |
| Container Ship | Per TEU | $74–$82 | $90–$100 | $105–$120 |
| Bulk Carrier | PC/UMS Tons | $3.24 per ton | $4.50 per ton | $4.85–$5.50 per ton |
| Tanker (LNG/LPG) | Per cubic meter or ton | N/A | $3.00–$3.50 per ton | $3.75–$4.20 per ton |
| Passenger Ship (Cruise) | Per berth | $135–$140 per berth | N/A | $150–$165 per berth |
| Vehicle Carrier (RoRo) | Per vehicle space (CEU equivalent) | $70–$75 | $85–$90 | $95–$110 |
| Small Vessels (e.g., yachts) | Vessel length (feet) | $800–$1,500 | N/A | $2,000–$3,000 |
Threat of China’s presence
The trade value of the United States compared to China is still far apart, but signs of strengthening China’s long-term role around Panama and Latin America are becoming more apparent. China’s presence through the Belt and Road Initiative (BRI) launched by President Xi Jinping to enhance economic and infrastructure connections between China and various countries is also penetrating the U.S. neighbor. Some significant projects include:
- Margarita Island Port development: China Landbridge Group purchased the largest port on Margarita Island and initiated the construction of a new deepwater port named Panama Colón Container Port (PCCP). This project is expected to increase the port’s capacity to 3 million TEU per year.
- High-Speed Rail line: China Railway Design Corporation conducted a feasibility study for a high-speed rail line spanning 391 km that connects Panama City with the Costa Rica border. This project is expected to take six years and create thousands of jobs.
- Atlantic Bridge: Vinci Construction built the Atlantic Bridge in Colón, Panama, which is the longest concrete cable-stayed bridge in the world with a main span of 530 meters. This bridge allows vehicles to cross the canal without being disrupted by canal operations.
Although China’s involvement is primarily in the economic sector, many are concerned that it could be dual-use, including for future military infrastructure purposes, even including espionage. Trump has expressed frustration over what he perceives as unfair practices, including the influence of Chinese state-owned enterprises in securing lucrative contracts for port operations and canal expansions.
Maritime, military strategic pillars
The Panama Canal is a strategic chokepoint for trade and military. Control or dominance over this point can influence the flow of traffic or resources. Historically, the U.S. Navy used it during World War II for rapid movement of ships, including submarines, between Atlantic and Pacific Oceans.
During the Cold War, the navy positioned it as a strategic asset for rapid deployment of forces, efficient in terms of time, fuel, and flexibility. After the control transfer in 1999, the United States retained the right to intervene if the canal’s neutrality was threatened. Currently, the United States is also interested in using it for humanitarian missions, defense operations, and maintaining operational readiness for military exercises.
Closing
As we enter 2025, the world witnesses the return of Donald Trump to power for the second time (Trump 2.0). Meanwhile, President Xi Jinping has entered his third term, with constitutional support allowing lifetime leadership. Amid the increasingly intense geopolitical rivalry between the United States and China, the Panama Canal has become one of the main focal points. Panamanian President José Raúl Mulino firmly maintains his country’s sovereignty over the canal, rejecting Trump’s threat to take back control.
In Indonesia, President Prabowo Subianto continues programs of his predecessor Joko Widodo, focusing on comprehensive economic and political reforms. With the spirit of nationalism and collective determination of the people, we hope President Prabowo can leverage this geopolitical dynamic and global competition to achieve the Golden Indonesia 2045 Vision. In this context, Indonesia must be astute in reading the global power map and taking strategic steps to ensure national interests remain safeguarded.
Happy New Year 2025.
The writer, Senior Advisor to the Minister of Energy and Mineral Resources (2019-2023), holds Doctoral degree in Energy Geostrategy and is an alumnus of the Indonesian Defense University.
