Examining U.S. Vs. China’s Rivalry Over Panama’s Canal

The U.S. and Panama have deepened security cooperation, with agreements allowing U.S. troops to deploy to bases along the Panama Canal for training and operations. This move is framed as a response to perceived Chinese influence, particularly through commercial operations like ports managed by Hong Kong-based CK Hutchison Holdings at Balboa and Cristóbal. However, Panama retains sovereignty over the canal, and no evidence suggests China directly controls it.

China is the second-largest user of the canal after the U.S., and Chinese firms have operated ports under commercial agreements. A 2021 port concession renewal with CK Hutchison is under scrutiny in Panama, with lawsuits pending against officials involved. Meanwhile, a proposed $19 billion deal to sell these ports to a U.S.-led consortium, including BlackRock, has faced delays, partly due to China’s antitrust review, signaling Beijing’s pushback. The Trump administration has prioritized reducing China’s regional presence, with rhetoric about “taking back” the canal. Despite claims of toll-free passage for U.S. warships, Panama’s President José Raúl Mulino and the Canal Authority have denied any changes to fee structures, emphasizing neutrality under the 1999 treaty.

The U.S. has not secured permanent bases, as Panama opposes this, but rotational troop deployments are permitted. Mulino has rejected assertions of Chinese control, exited China’s Belt and Road Initiative in February 2025, and cooperated with the U.S. on security. However, Panama remains cautious about its sovereignty, with public protests against perceived U.S. overreach. While the U.S. has strengthened its strategic foothold, China’s influence is primarily economic, not military, and Panama’s neutrality limits how far either power can dominate. The canal’s global importance—handling 40% of U.S. container traffic and 5% of world trade—means Panama balances both nations carefully.

No single deal has fundamentally altered the canal’s status, but U.S. moves have heightened tensions with China, leaving Panama navigating a delicate geopolitical tightrope. Always dig into primary sources like treaty texts or Canal Authority statements for clarity—narratives can twist faster than a ship in the Miraflores Locks. The U.S. seeks to maintain its global hegemony, while China aims to expand its influence, particularly in the Indo-Pacific. Key flashpoints include Taiwan, the South China Sea, and control over critical trade routes like the Panama Canal.

The U.S. counters China’s Belt and Road Initiative with alliances like AUKUS and the Quad, while China strengthens ties with nations in Asia, Africa, and Latin America. The U.S. and China compete for dominance in global markets. China’s rapid growth—its GDP is roughly 75% of the U.S.’s in nominal terms—threatens American economic primacy. Trade wars, tariffs, and sanctions (e.g., on Huawei) reflect efforts to curb each other’s advantages. China’s control over critical supply chains (rare earths, semiconductors) clashes with U.S. pushes for reshoring and “friend-shoring.”

Both nations vie for supremacy in AI, quantum computing, 5G, and biotech. The U.S. restricts China’s access to advanced chips and tech, citing security concerns, while China invests heavily in domestic innovation to reduce reliance on Western tech. Cybersecurity and data governance (e.g., TikTok bans) are also battlegrounds. The U.S. promotes liberal democracy, while China’s authoritarian model under the Communist Party offers an alternative. This fuels disputes over human rights (e.g., Xinjiang, Hong Kong) and global influence, with each accusing the other of undermining international norms.

Both nations modernize their arsenals, with China expanding its navy and hypersonic missiles, and the U.S. bolstering its Pacific presence. Defense budgets are massive—U.S. at ~$877 billion, China at ~$292 billion (2024 estimates)—but China’s lower costs and focus on asymmetric capabilities narrow the gap. The canal exemplifies their rivalry. The U.S. views Chinese commercial presence (e.g., port operations) as a strategic risk, prompting security agreements with Panama. China, meanwhile, leverages economic ties to maintain influence, though Panama’s neutrality limits either side’s control.

The rivalry shapes alliances, trade blocs, and climate cooperation. While outright conflict is avoided, proxy tensions and economic decoupling raise risks. Both sides have domestic pressures—U.S. populism, China’s economic slowdown—that amplify posturing. The rivalry isn’t zero-sum but drives global uncertainty.