Bonus: The American Desire To Take Back The Panama Canal
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Wait, did the United States just take back the Panama Canal again? Hello my friends, Takuya here, and welcome back to the History of Everything Podcast YouTube channel. And from the very beginning of this episode, I just need to say something right now. I need to let you all know that this entire saga has been just a wild ride. And really, who knows exactly where it is going to end up. Because when I talk about this, this is something that involves not just Panama and Trump, but also China, as well as now BlackRock.

Like, yes, the private equity firm, which has apparently struck a $23 billion deal in order to place Panama Canal ports under American control. Something which, at the time that I'm making this, only yesterday, Trump would go and laud as taking back or reclaiming the canal, stating, quote, my administration will be reclaiming the Panama Canal, and we've already started doing it.

Just today, a large American company announced that they are buying both ports around the Panama Canal. This was in and of itself pretty massive news, and in turn, the president of Panama would respond by calling the entire thing an outright lie. And as a result, this whole thing has generated very mixed reactions depending upon one's political affiliation. For

For context, the issue between Donald Trump and the Panama Canal is something that revolves around Trump's claims that the canal is under Chinese control or Chinese influence or at risk of. In 2018, Trump would state that the Panama Canal was, quote, controlled by China, which he believed was a threat to the United States. He claimed that China had taken it over and that the U.S. had lost control of this strategic waterway. However, when I say that, these claims have been heavily disputed by the Panamanian

government as well as others. And the Panama Canal is something that has been owned and operated by the Panama Canal Authority, the ACP, since the year 1999. That being when the United States had transferred ownership of the canal to Panama as part of the Torrijos-Carter treaties. Trump now wants it back, or at least when I say that, greater influence over it.

So, of course, looking at this entire thing, it is absolutely confusing, and a lot of you are probably wondering what the heck is actually going on. Why does Trump want the canal back under American control? Why are there accusations of Chinese security threats in the region? And what does this mean for American relations and power in Latin America moving forward?

Well, my friends, depending upon where it is that you're getting your information from, you're likely to come to different conclusions just by virtue of, well, whatever your source is that you have chosen to consume or has been presented to you. Like, I can tell you this right now, but sorting through the drama of Panama for the last several months has been a constant headache for myself. And no matter what it is that I say to you right now, I'm going to be accused of something in the comments section. It happens every single time.

Luckily, thanks to the fact that I am sponsored by Ground News, I'm at least able to mitigate that bias somewhat, which is helpful for me. Like yes, of course, if you look at left-wing sources, the headlines typically accuse Trump of lying, emphasizing a kind of strong bias against him.

Whereas if you look at right-wing sources, they are typically more apologetic, presenting Trump's remarks as valid claims about national security and not really accusing him of anything. What is so fascinating to note here, though, is that both types of sources do agree on one thing, though. However it is you view it morally, this whole thing has actually been a win for Trump. Because look, my friends, understanding these biases is absolutely necessary, especially in today's day and age, and that is why I am so incredibly grateful to be sponsored by Ground News.

a service that I regularly use in order to compare my information sources. With this, I can look at the varying different political biases of news organizations, whether they are a private media source or a state-sponsored source, who owns them, their factuality rating, and so much more. We know that this is true. With Trump in charge, media sources around the world are having an absolute field day right now, and that means that you, the audience, need to be aware of exactly what is happening.

Luckily, Ground News is giving my viewers 40% off the unlimited access Vantage plan. So you can click the link down in my description or head over to groundnews.com slash history of everything. I highly recommend that you check it out. It's been a massive boon for me. But anyway, back to the story. First up then, as we always do on this channel, context. And mind you, we will be quick about that history.

The Panama Canal is a 51-mile or 82-kilometer-long shipping canal, something that connects the Atlantic Ocean to the Pacific Ocean, crossing the Isthmus of Panama in Central America. The canal, when we talk about this thing, is one of easily the most important and complex engineering projects in history, and its construction and operation have had a significant impact on global trade, economy, and politics for quite literally generations.

Historically, the idea of building a canal across the Isthmus of Panama is something that dates back all the way to the early 16th century. This being when Spanish conquistador Vasco Núñez de Balboa would first propose that very same idea. Of course, you know, I'm not really going to go into all that because, of course, the technology and labor simply was not there at the time. And so it wasn't going to be until the 19th century that the first attempts to build a canal were made.

In 1881, the French began constructing the canal, but ultimately they were forced to abandon that project in 1889 due to terrible engineering problems, tropical diseases, and financial issues. And oh my god, my friends, when I call this whole thing a disaster, oh, this was horrible. We are definitely going to have to do a full podcast episode on that, my friends. Either way, it is here that the United States begins to get involved.

And when I say involved, look, I'm not telling the full story about it, but the United States basically created the country of Panama in 1903 by supporting Panamanian rebels against Colombia, which is, you know, it's part of America's history. That's the point. The U.S. wanted to gain control of the future canal, and Colombia didn't really want to go through with that deal.

Anyway, in 1904, the US would take over the project and construction began under the leadership of President Theodore Roosevelt. The US Army Corps of Engineers would oversee the construction of the canal, which ultimately was completed on August 15th, 1914. It truly was a marvel of engineering and the entire thing was built at a cost of $350 million.

which, if you look at that in today's money, is about $11 billion today. Officially, then, the Panama Canal would open on August 15, 1914, and it quickly became a vital waterway for international trade. The canal would allow ships to pass from the Atlantic to the Pacific, saving time, fuel, and lives by avoiding the need to navigate around South America. And I cannot understate just how incredibly massive of a deal this was.

After all, not only was this a huge boon for trade, but only around 20-something years later, World War II was going to break out, and at that point, it was a critical passageway for the Allied war effort between the Atlantic and Pacific Oceans. This was such a crucial staging point for the United States that it kept the entire thing under very close control. But...

The relationship between the United States and Panama gradually began to fall apart over disagreements after World War II about control of the canal, treatment of Panamanian workers, and questions about whether the U.S. or Panamanian flag should be flown jointly over the canal zone and a whole host of other issues. It gets really nitty gritty at that point. The

The big thing is that after World War II, we saw a massive period of decolonization. And in the 1960s and 1970s, Panamanian nationalism was on the rise. And there was increasing demands for the U.S. to transfer control of the canal to Panama. These tensions would arguably reach their peak on January 9th, 1964, when anti-American riots would lead to several deaths in the canal zone and the brief severing of diplomatic relations between the two countries,

It wasn't a good time. Of course, that wasn't going to last forever, and the Panamanian government, led by General Omar Rijos, began to negotiate with the United States for a new treaty that would give Panama greater control over the canal. That being said, it wasn't really an easy thing. The negotiations were difficult and protracted. They went on for quite a while, but ultimately, the two countries would reach an agreement in 1977 under President Jimmy Carter.

The Panama Canal Treaty, which was signed by U.S. President Jimmy Carter and General Torrijos, would agree to transfer control of the canal to Panama by the end of 1999. To that end, the treaty would establish a transition period during which control would gradually be ceded.

The treaty was ratified by the U.S. Senate in 1978, and this is something that marked a significant shift in the relationship between the U.S. and Panama, as well as a reduced military presence within Latin America. Which is important to mention, because the treaty itself had several key provisions, including granting a U.S. presence. The treaty allowed the United States to maintain a military presence in the Canal Zone, but it is something that limited the size and scope of the U.S. military presence. At the

At the same time, you also had an economic factor that was included. The treaty provided for the U.S. to pay Panama an annual fee of $10 million for the use of the canal, and it also provided for the U.S. to invest in the development of the canal zone. Finally, and arguably the most important factor that needs to be considered here, and this is the thing that Trump has been angry about, neutrality. The

The treaty declared that the canal was to be a neutral waterway, open to ships of all nations. You may wonder why it is that that is something that is upsetting. Well, it's not that factor, necessarily. The big thing that is upsetting Trump now is that it is in his belief that Panama has not been neutral. Either way, on December 31st, 1999, the Panama Canal was officially transferred to the Panama Canal Authority, the ACP, a Panamanian government agency.

agency. The ACP has since then been responsible for the management, maintenance, and operation of the canal. Which, on that note, my friends, for Panama, the transfer of control is something that marked a significant increase in sovereignty as well as economic benefits.

As just an example, so you understand the sheer amount of revenue from the canal, this is something that made up about 4% of Panama's GDP in 2024. Which, I know, really, looking at that, it doesn't sound all that high. Like, it's not some insanely high number that you would see with oil in a nation such as Saudi Arabia. However, that being said, 4% of one's entire GDP being because of a canal is still pretty significant.

But then again, the canal is one of the most important waterways in the world, after all, and the transfer of control allowed Panama to develop the canal zone and to invest in the country's infrastructure and economy. It was a really big deal. For the United States, yes, it was a loss in power, technically. The transfer of control marked a significant shift in its foreign policy priorities and a reduction in its military and economic commitments overall.

commitments abroad. The US had maintained a significant military presence in the canal zone and the transfer of control allowed the US to reduce its military presence and cost that it suffered from that and to focus on other strategic priorities. Really, it was a kind of trade-off. And the transfer of control of the Panama Canal also had very significant implications for international relations and global trade. The canal, as I've already said, is a very critical waterway that connects the Atlantic and the Pacific Oceans.

and it is an important route that is used for international trade across the globe. The transfer of control marked a significant increase in the canal's neutrality and accessibility to other nations and would contribute to the growth of international trade and economic development in the region, tying Panama to the global world and not just the U.S.

In fact, things grew so much that, ironically, it actually became a bit of a problem early on. Shortly after the Panamanians retained full control of the canal in 2000, shipping volume would quickly exceed the waterways capacity. They just didn't have the room to be able to move that much shipping through. And so a massive expansion project began in 2007 and was completed around a decade later.

This is something that would cost around $5 billion and would allow for the accommodation of larger ships, which became significantly more common as globalized trade became the dominant economic... What would I even say here? Thing.

If you've ever seen one of those massive container ships, you know exactly what it is that I'm talking about. Globalized trade was just what was done. Anyway, as time has gone on, the importance of the canal is something that has only grown, especially for the United States. While not the biggest waterway in the world, the Panama Canal is still among the most significant for global trade, as it services around 5% of the total volume of maritime trade globally. For the United States, though, the canal is great.

critical because 40% of U.S. container traffic passes through the canal annually, carrying around $270 billion in cargo, and this is something that is only expected to increase with time. The Panama Canal is, of course, during its standard operating times, the fastest route for trade between the U.S. East Coast and Asia. For example, if you're going from New York to Beijing or Shanghai. Of

Of course, trade from Europe to the U.S. west coast or South and Central America to Asia is also something that relies heavily upon the canal. Still though, their presence is chump change in comparison to the United States. Over 74% of the trade volume that flows through the Panama Canal is either heading for or coming from the United States. It is that critical.

And so that, my friends, considering all the context that I've explained here now, that is where the potential issue with China comes into Trump's view. You see, my friends, in a country that is as open to globalized trade as Panama is, China has had a fairly significant presence there for many years.

In fact, the Chinese community in Panama makes up some 135,000 people, which is huge. That represents around 4% of its 4 million inhabitants. For context, though, this relation is something that has existed for a lot longer than China has been controlled by the CCP. Since 1911, Panama has maintained diplomatic relations with China.

However, the issue was that, you know, China went through its whole civil war, and after the defeat of the Chinese Nationalist Party and the victory of Mao Zedong's Communist Party, the Panamanian state would decide for a while to maintain diplomatic relations with Taiwan due to the fact that, well, it was capitalist and kind of beholden to the foreign policy of the United States during the Cold War. Really, since 1949, Panama remained one of Taiwan's major allies...

Until things kind of began to change. As time went on, the CCP gained significantly more leverage over global affairs. And over the past two decades, China has drastically strengthened its economic, diplomatic, and military ties with Latin America and the Caribbean.

Eventually, China became the second largest canal user after the United States. And in fact, the first ship to cross the expanded canal at the inauguration held in June of 2016 was a vessel of the Chinese shipping company, Costco. Really, as time went on, China became more and more involved with Panama. And this is something that was facilitated by former Panamanian president Juan Carlos Varela.

You see, my friends, in 2017, Varela would drop diplomatic recognition of Taiwan, opening an embassy in Beijing, and pursued Sino-Panamanian trade and investment initiatives, including making Panama the first Latin American country to sign on to the Belt and Road Initiative, something that I've actually talked about extensively, as this is something that is both an economic effort by China and simultaneously a massive soft power move.

China would, of course, seize the opportunity to be able to integrate dozens of its businesses, as well as some of its more predatory practices, into varying different parts of Panama. Whether this is its energy sector, its culture, its academia, infrastructure, mining, telecommunications, really anything that they could get involved in, they absolutely did.

Under Varela, this cooperation would drastically increase. Panama would go and sign up to a series of, well, eventually abandoned high-profile initiatives with Chinese companies, as you've oftentimes seen with many of the failed Belt and Road Initiative projects.

including a $4 billion high-speed train between Panama City and David, a $1 billion port investment by a shady China-based consortium, which has a whole host of legal troubles in a port in Cologne. Oh dear God, that is a story right there. And also a $1 billion natural gas power plant that was originally designed to support the entire project. In addition to these major moves, other Chinese companies began to rapidly move into the Pan

market, utilizing it as a central hub for the region in Latin America. In telecommunications, Chinese tech giants Huawei, ZTE, and Xiaomi were all well-established. Huawei uses the Cologne Free Trade Zone as a regional distribution hub.

In fact, one of the things that they would actually attempt to do there is to establish an integrated smart city in Cologne, which in the end ended up being blocked, though they still did end up putting around 300 security cameras in Cologne, which are actually still there to this day.

Either way, though, that is less relevant for this video. Instead, the more concerning or relevant part here in the case of the Trump administration is the Chinese ownership of ports in the canal and what he would call exorbitant fees in recent years. And when I talk about this, that second part is something that really does need clarification. You see, my friends, when El Nino exacerbated drought conditions in 2023 to 2024, this is something that caused low water levels in the canal's largest reservoir, Gatun Lake.

To understand what it is that this means, lower water levels decrease not only the number of vessels that are able to transit and move through the canal, but also the volume of cargo that they are able to carry. As you can imagine, this severely backs things up when it comes to shipping. Canal shipping is not immune to the laws of supply and demand.

If you have fewer vessels that are able to transit through the canal, that means that prices are going to be higher. Furthermore, the Panama Canal authorities would levy a freshwater surcharge, which is something that increases when water levels are low in order to incentivize water conservation as well as decrease traffic because they don't want people to really go through it as much.

The more ships that don't divert or make reservations during the drought, the greater the wait time, which at one point would manage to reach a peak of 21 days in the summer of 2023, drastically increasing the cost of goods. Increased costs and shipping times during the drought would increase shipping costs by as much as 14% year over year for dry bulk goods, things such as coal or grain or things like that.

You had 12% increase for vehicle carriers, 5% and 3% increase for liquefied petroleum gas and liquefied natural gas, and really so much more. The list goes on and on. Basically, every single thing was going to increase in price. Yes, Trump was right. Prices did increase. They did go up. And yes, this would end up largely targeting America, the biggest user of the canal, but

But that all being said, it does not mean that prices were hiked on purpose to target the U.S. It is something that naturally would happen by virtue of supply and demand.

Anyway, that is something that just had to be stated. What about the Chinese ports, though? Well, in commercial logistics, Hong Kong-based Hutchinson Holdings would control two of Panama's five main canal zone ports, with one being on each side of the Panama Canal itself. That, as you can probably imagine, would create the impression of there being a choke point. But this was not a recent development.

The company has operated the ports of Balboa and Cristobal for more than two decades. And as for its ties to China, the publicly listed company is not...

Technically speaking, financially tied to the Chinese Communist Party, though Hong Kong firms are subject to state oversight. And you need to remember when I talk about this, that is how anything works when talking about a company in China. It's a really messy thing where even if something is separate, it's always kind of a part of it.

As George Mason University law professor Eugene Kontorovich would say at a Senate hearing in January of 2025, Which, honestly, is understandable. But,

But at the same time, as Julio Yao, who was one of Panama's advisors when it signed the Neutrality Treaty, would say about the matter, quote, Hutchinson Port Holdings operates hundreds of ports around the world, including in the United States. If these ports threaten U.S. security, why don't they terminate Hutchinson's contracts in their country? Which, again, I do also get. Really, the problem at this point is that we are talking about security concerns, just like what ended up happening with TikTok.

Nothing had happened yet, but there were fears that something could happen. When I talk about this, former Republican Senator Marco Rubio, who is now Trump's Secretary of State, he's been a very vocal critic of Chinese influence over the canal. And in his Senate confirmation hearing, he said that Beijing, through the expansion of Chinese-owned companies, has, quote, the ability to turn the canal into a choke point at a moment of conflict, which

which is, quote, a direct threat to the interest and national security of the United States. After this, he would go on to meet with the current Panamanian president, President Molino, in early February and insist that China was exerting influence over the canal's operations. The focus of the conversation was the Chinese consortium running the ports, and Panama would reject that China had any influence or control over canal operations.

As Molino would write, quote, cooperation between our governments passes through clear understandings in terms of issues of mutual interest. It doesn't have anything to do with reclaiming the canal nor with tarnishing our national sovereignty.

End quote. Either way, despite this stance of not giving up the canal, President Molino is actually a fairly conservative leader, someone who is favorable to the United States and has sought to curb migration through the Darien Gap as well as crack down on drug smuggling.

He is, for all intents and purposes, an ally. And in meeting with Rubio, Molino received the kind of political power necessary and geopolitical leverage to sever Panama's relationship with China, which is something that we would actually end up seeing. Rubio, for his part, would convey Trump's view that the sovereignty of the canal was in question due to China's presence in the country, not necessarily that, oh, Panama can't control it.

delivering American expectations to them. Really, in the end, both countries ended up achieving the optics that they wanted, but what does that mean the actual results were? Well, here's where we actually get some bigger moots. Molina would announce that Panama was going to withdraw from Beijing's Belt and Road Initiative.

The Chinese foreign ministry would condemn Molino's decisive shift in relations. Furthermore, before Rubio's arrival, the Panamanian government had already undertaken an audit of the 25-year no-bid extension agreement with Hutchinson, which would create a process for allowing another company to operate the Balboa and Cristobal ports. And now, just as I said in the beginning of this video, that other company is coming into play. BlackRock.

Yeah, I know that for anyone on the internet right now, that is not exactly a friendly name that people get really excited when they hear, unless it's usually for negative feelings. BlackRock, a US-based asset management giant, and oh dear God, are they massive, have agreed to purchase the ports of Balboa and Cristobal from CK Hutchinson. The deal that they launched is worth approximately $22.8 billion, and it's worth $22.8 billion.

is not just a singular thing. It's part of a larger transaction that will give BlackRock control over 43 different ports in 23 different countries. As Frank Sixt, who is co-managing director of CK Hutchinson, would say in a statement, the transaction was, quote, the result of a rapid, discreet, but competitive process in which numerous bids and expressions of interest were received, end quote.

He would also go on to say, quote, I would like to stress that the transaction is purely commercial in nature and wholly unrelated to recent political news reports considering the Panama Ports. So yeah, according to the statement from the companies, guys, this has absolutely nothing to do with politics. This was purely a commercial transaction, which, you know, maybe it is. But for Trump, that doesn't

doesn't really matter. Despite polarizing media coverage, this has been a win for him. Having a U.S. investment company take over the ports would reduce China's influence in the region. And according to people who are familiar with the negotiations per Bloomberg, the deal

the deal wouldn't have come together without Trump's support. As for what this means for the future, really, who can say? But as America retracts itself militarily and aid-wise from the world stage, there does appear to be signs of investment opportunities that will increase America's soft power and presence around the world. The results, at this point of that though, is uncertain. But of course, you can be sure that we're going to cover things as they develop, and we're going to explain their background, context, and everything else. It's how it is that we operate here on this channel. And who

And who knows? Maybe at this point, Greenland will be next. There's already discussions about that. Either way, my friends, that is the end of today's video. Thank you very much for watching. I appreciate all of you. Remember to like, comment, subscribe. And if you really want to support my channel, not only can you go and get my merch, which I'm going to ask you to please do that because I'm probably going to have to replace my computer here. But simultaneously, if you want to go on an adventure with me, I am leading trips to Japan, Mongolia, and Turkey. Links for which are down in the description. So if you want to go on an adventure, by all means, check those out.

See you next time. And goodbye, my friends.

As a longtime foreign correspondent, I've worked in lots of places, but nowhere as important to the world as China. I'm Jane Perlez, former Beijing bureau chief for The New York Times. On Face Off, the US versus China, we'll explore what's critical to this important global relationship. Trump and Xi Jinping, AI, TikTok, and even Hollywood. New episodes of Face Off are available now, wherever you get your podcasts.