The Real Reason Behind the Fight for Control of the Panama Canal

While threats of tariffs against China, Mexico and Canada have dominated headlines early on in President Donald Trump’s second term, a conflict over control of the Panama Canal has become the next major battleground for Trump’s aggressive approach to global trade.

The idea that the U.S. should retake control of the Panama Canal was brought front and center in Trump’s inaugural address January 20, in which he claimed that the U.S. has been “treated very badly from this foolish gift that should never have been made, and Panama’s promise to us has been broken.” 

But strong-arming Panama into handing the canal back over to the U.S. would face a mountain of legal obstacles, says attorney Vanessa Miller, who specializes in international supply chain agreements and commercial contracts as a partner at Foley & Larder LLP.

“I think it’s fairly unrealistic at this point in time, and there are a lot of reasons for it,” Miller says. 

The Panama Canal was built by the U.S., which also operated it from its opening in 1914 until 1977, when then-President Jimmy Carter signed a pair of treaties to hand over control over to Panama. One guaranteed that, after a period of joint American–Panamanian control, the Panama government would take sole control in 1999, which it did. The second was a neutrality treaty still in effect today, which mandates equal treatment of all countries transiting the waterway. 

At the core of Trump’s dispute with Panama is his claim that the country has violated the neutrality treaty by allowing China to grow its influence …