What is the Panama Canal?

The canal is a major waterway connecting the Atlantic and Pacific Oceans, allowing sea travelers to avoid an additional 7,000 nautical miles (13,000 km) around the tip of South America.

The 51 mile (82 km) long canal cuts through the middle of Panama, a country that occupies the strip of land between Central America and South America.

As of September 30, nearly 10,000 ships passed through the canal, transporting 423 million tons, including food, minerals and manufactured products. More than 40% of consumer goods traded between Northeast Asia and the U.S. East Coast last year moved through the canal.

The United States is the canal’s largest customer, responsible for about three-quarters of the cargo transported through the canal annually, while China is the second largest customer.

Who owns the channel?

The government of Panama has owned and operated the canal for 25 years through a special agency, the Panama Canal Authority.

The United States operated the canal in the 20th century, taking control of the Canal Zone and beginning construction in 1904 after helping Panama gain independence from Colombia. Opened in 1914, the canal revolutionized global shipping and allowed thousands of cargo ships and American battleships to pass through each year.

U.S. control of the canal and the exclusion of Panamanians caused tensions between locals and U.S. visitors, prompting authorities in the 1950s to build a wall between Panama City and the canal area.

A large protest occurred on January 9, 1964, during which 28 people were killed in the subsequent crackdown by authorities, sparking international outrage and encouraging U.S. strategists to abandon the canal. In 1977, US President Jimmy Carter and Panamanian leader Omar Torrijos signed two treaties to phase out US control of the canal.

After a period of shared management marred by a U.S. invasion to overthrow military leader Manuel Noriega in 1989, Panama took full control of the canal in 1999.

What does Trump want with this?

Trump has demanded that Panama return the canal to the United States unless the country manages the waterway in a way he deems acceptable.

The US president-elect criticized what he described as “exorbitant” fees charged to the US government, US Navy and companies to use the passage.

“The fees charged by Panama are ridiculous,” he wrote. “This complete ‘rip-off’ of our country will stop immediately.”

Vessels using the canal must pay fees set by the canal authority. Variable rates have skyrocketed in recent years as droughts worsened by global warming dry up key reservoirs and reduce the canal’s capacity.

Due to the severe drought in late 2023, only 22 ships a day were crossing the canal instead of the usual 36, causing ships to queue for weeks or pay up to $4 million (£3.2 million) to move forward. Transit numbers fell by almost a third in the year to September this year.

The canal authority has allowed an increasing number of vessels to use the canal throughout 2024, easing congestion, but will increase fees and introduce some additional fees on January 1, 2025. Panamanian President José Raúl Mulino said transit fees for the canal had not been increased.

Trump also warned against letting the channel fall into the “wrong hands” and appeared to suggest that China was exerting influence over it. A Chinese company based in Hong Kong controls two of the five ports adjacent to the canal, one on each side, but Mulino said Panama has full control of the canal.

“Every square meter of the Panama Canal and its adjacent zones is and will continue to be part of Panama,” he said in a video statement on Sunday.