A Canal Too Far?

Few waterways carry the geopolitical weight of the Panama Canal. Stretching 51 miles across the isthmus that divides the Atlantic and Pacific oceans, the canal is a linchpin of global trade, linking economies and empires since its construction over a century ago. Now, this vital artery is at the centre of a fresh controversy after U.S. president-elect Donald Trump demanded that Panama lower its shipping fees or face the improbable prospect of returning control of the canal to the United States.

Calling the canal a “vital national asset” in a recent speech, Trump hinted at leveraging U.S. power to repossess the waterway if his demands are unmet. Panama’s president, José Raúl Mulino, swiftly rebuffed the threats, asserting his country’s sovereignty and independence were “not negotiable.”

The canal’s history is a chronicle of imperial ambition and local resistance. Its construction, beginning in 1904, was an engineering marvel but also a diplomatic coup. After failed French efforts to carve a route through the dense Panamanian jungle, the United States seized the opportunity to complete the project, fostering Panamanian independence from Colombia in 1903 in exchange for perpetual control of the canal zone.

For decades, the canal was a symbol of American dominance. The United States operated it as an unassailable stronghold, benefiting from the tolls of thousands of ships that traversed its locks. But the arrangement bred resentment in Panama, where the canal zone was a constant reminder of foreign control.

The turning point came in the 1970s under Panamanian leader Omar Torrijos and U.S. President Jimmy Carter, who negotiated the Torrijos-Carter Treaties. The agreements set a timeline for the gradual handover of the canal to Panama, culminating in full sovereignty in 1999. For Panama, regaining control of the canal was a moment of national pride—a hard-won victory that symbolized its emergence as a fully sovereign state.

Trump’s remarks revive the ghosts of American interventionism. His rhetoric — vowing to “demand” the canal’s return — reflects a transactional worldview where economic grievances justify territorial ultimatums. It is a provocative stance, given the historical sensitivities surrounding the canal. Panama, a nation that unified over the struggle to reclaim the canal, is unlikely to entertain any suggestion of relinquishing it.

Mulino’s response encapsulated this defiance. The tolls, which fund the canal’s maintenance, modernization, and operational costs, are set in accordance with global market conditions and are vital for Panama’s economy.

Trump’s broadside against Panama is part of a larger pattern. His threats to renegotiate NAFTA and his critiques of Canadian and Mexican trade practices suggest a willingness to upend established relationships to satisfy domestic political objectives. While such rhetoric may play well to his supporters, it risks undermining America’s standing in the world.

Trump’s threats may resonate with his base, conjuring a nostalgic vision of American dominance, but they lack both legal and practical grounding. The Torrijos-Carter Treaties are binding international agreements, ratified by the U.S. Senate, and there is no realistic mechanism for reversing the transfer. Moreover, such a move would alienate not just Panama but also other Latin American nations wary of Washington’s historical penchant for interventionism.

For Panama, retaining control of the canal is not just about sovereignty; it is about securing its economic future. The canal generates significant revenue, accounting for 6 percent of the country’s GDP. Small wonder, then, that Panamanians of all political stripes have rallied behind Mulino’s rejection of Trump’s demands.

The canal’s history is a testament to the delicate balance between power and principle in international relations. Any attempt to renegotiate its status would not only strain U.S.-Panama relations but also signal a disregard for the rules-based international order.