Policy Backgrounders

The Panama Canal and US Foreign Policy

January 17, 2025

Recently the President-Elect charged that Panama is “ripping off” the United States with “exorbitant” tolls on the Panama Canal and permitting Chinese soldiers to run it, in violation of the Panama Canal Treaty. In response, President José Raúl Mulino both strongly denied the specific charges and said that “every square meter of the Panama Canal and its adjacent zone belongs to Panama and will remain so.”

• The US operated the Panama Canal from its completion in 1914 until 1999 and remains the largest user of the Canal by flow of cargo, followed by China and Japan.
• Under the Torrijos-Carter Treaties of 1977, the US retains the permanent right to defend the Canal against threats to its neutral operation, but Panama gained complete operational control of the Canal. Panama says that return of the Canal to US control is “non-negotiable.”
• A subsidiary of a Hong Kong company operates ports near both entrances to the Canal but does not have any operational role in the Canal itself.
• The Canal was expanded in 2016 under Panamanian operation, permitting larger “Neopanamax” ships to transit the Canal. Shipping volumes have risen substantially over the last decade, although drought in 2023-2024 reduced passages for a time.
• Tolls on the Canal are based on tonnage and other criteria (such as berths for cruise ships; they rose in response to the recent drought to keep Canal revenues steady.