Panama Canal: What you need to know now
January 8, 2025
With US President-elect Donald Trump repeatedly threatening to take control of the Panama Canal, and the Panamanian government insisting that its sovereignty of the waterway is "non-negotiable," the eyes of the world once again turn to the strategic naval passage between the Atlantic and the Pacific oceans.
Who built the Panama Canal?
Trump is eager to remind the world that the United States built the canal over a century ago and revolutionized global navigation at an enormous cost in human lives. Before 1914, ships looking to move from the Atlantic to the Pacific undertook a risky, monthslong journey around South America. Even modern vessels take about two weeks to complete the trip, while crossing the canal takes only eight to 10 hours.
Trump recently claimed 35,000 or 38,000 "American men" died building the Panama Canal between 1904 and 1914. And while thousands of lives were indeed lost during construction to malaria, yellow fever, industrial accidents and other factors, the precise math behind the Trump-provided estimate is not clear.
The official death toll for the American construction effort stands around 5,600 people, and while the true number may well be higher, the overwhelming majority of workers on the site were from Barbados. The number of Americans who died during the construction was likely around 300, according to Matthew Parker, the author of "Hell's Gorge: The Battle to Build the Panama Canal."
It is possible that Trump is conflating the lives lost during the US push to build the waterway with an earlier, failed effort by France. The French project in the 1880s claimed the lives of between 20,000 and 25,000 workers, though nearly none of them were American.
Why is Panama in charge of the canal?
The US continued to operate the canal after its opening for many decades. In 1977, however, President Jimmy Carter agreed to gradually hand over the control of the zone to the Panamanian government. The treaty stipulated that the waterway would remain neutral and open to vessels of all nations. The United States also retained the right to defend it from any threat.
In 1999, the US completed its Panama pullout. The canal has since been managed by the government in Panama City. Now, Trump is accusing "the wonderful soldiers of China" of illegally operating it. Panamanian President Jose Raul Mulino dismissed those claims as nonsense.
"There are no Chinese soldiers in the canal, for the love of God," Mulino said in early January.
While there is no indication of China's military presence in the area, some US observers raised concerns about two ports that have long been managed by a subsidiary of Hong Kong-based CK Hutchison Holdings, and potential data leaks. Also, Panama's cooperation with Beijing in financing a new bridge over the canal has also raised eyebrows in Washington.
Why is the Panama Canal important?
Between 13,000 and 14,000 ships cross the 82-kilometer (52-mile) waterway in an average year, according to its managers. The system handles dozens of ships a day, using gates, locks and reservoirs fed from an artificial lake to lift the vessels up some 26 meters (85 feet) and bring them down again to sea level.
Vessels are charged for the crossing based on their size.
The United States — followed by China and Japan — is the Panama Canal's main client, with nearly 72% of cargo passing through either coming from or headed to US ports.
Recently, the canal authority was forced to reduce the number of crossings due to drought, while simultaneously raising prices. The canal brought in $3.45 billion (€3.35 billion) in net profit in the fiscal year 2024.
With US trade accounting for so much of the canal's traffic, its business also bore the brunt of the elevated costs. In December, Trump accused Panama of charging "ridiculous" and "exorbitant" fees, decrying it as "rip-off."
Can US retake the canal or reduce prices?
The terms of the 1977 treaty signed by Carter specify that Panama is to preserve neutrality, meaning that its government cannot charge less for ships transporting US goods. However, it is conceivable that pressure from the Trump administration could drive down prices across the board or force the canal authority to forgo higher fees during the next crisis.
Another less likely option is for the US to take military control of the canal by invading the Central American country. Washington did so in late 1989, when its troops were deployed to oust military dictator and former CIA asset Manuel Noriega.
In the aftermath of the US invasion, Panama's US-backed government abolished the military. The country of some 4.5 million people now maintains a small paramilitary force.
Trump has not ruled out military means in solving the dispute.
Edited by: Sean M. Sinico