Senate Hearing Grills Chinese Influence Over Panama Canal Amid Trump’s Call for US Control

A Senate Commerce Committee hearing today focussed on escalating concerns over China’s growing influence on the Panama Canal, a critical waterway that handles some 40% of U.S. seaborne container traffic and 6% of global trade.

Committee Chairman Ted Cruz (R-Texas) convened the hearing amid recent statements from President Trump calling for the United States to retake control of the Panama Canal over alleged Chinese influence on its operations, claims that Panama has strongly rejected.

The hearing highlighted several key concerns, including Chinese companies’ control of container ports at both ends of the Panama Canal and their ongoing construction of a bridge across the waterway. According to Cruz, this infrastructure control gives China potential ability to block canal access without warning.

“Chinese companies have won contracts, often without fair competition, as the infamous ‘Belt and Road Initiative’ has come to Panama. China often engages in ‘debt-trap diplomacy’ to enable economic and political coercion,” said Cruz.

Federal Maritime Commission Chairman Louis Sola testified that Panama’s corruption challenges have enabled Chinese expansion, noting that “Chinese companies have been able to pursue billions of dollars in development contracts in Panama, many of which were physical infrastructure projects, some on or adjacent to the Panama Canal. No bid contracts were awarded, labor laws were waived.”

Sola added that the FMC will intensify monitoring of the Panama Canal Authority’s practices, particularly regarding transit pricing.

“Should the Commission formally investigate the practices of the Panama Canal Authority and find them to be unfavorable, the Commission could act against the Republic of Panama broadly as opposed to the Authority specifically,” Sola said. He added that the Commission maintains authority to implement significant penalties, including potential bans on Panamanian-flagged vessels from U.S. ports.

Panama Canal transit fees have reached what some consider exploitative levels that Senator Cruz argues “disproportionately affect Americans.”

“Canal profits regularly exceed $3 billion. This money comes from both American taxpayers and consumers in the form of higher costs for goods,” said Cruz. “We cannot afford to let American shippers be extorted. We cannot turn a blind eye if Panama exploits an asset of vital commercial and military importance.”

Witness Eugene Kontorovich, a legal scholar and Senior Research Fellow at the Heritage Foundation, raised concerns over potential violations of the 1977 Neutrality Treaty between the U.S. and Panama, in which the U.S. agreed to cede control of the Panama Canal Zone to Panama in exchange for a special “regime of neutrality.” In his inauguration speech, Trump accused Panama of violating the Neutrality Treaty and suggested that the U.S. could no longer tolerate “Chinese exploitation” of the canal.

Kontorovich warned that Chinese investments in Panamanian infrastructure could compromise the canal’s neutrality. “The treaty is silent on the question of how much is too much,” he said.

Adding to concerns, the Panama Canal faces significant operational challenges, including recent drought conditions that forced restrictions on vessel transits and drafts.

“Without a solution, projections suggest that by 2050, the Canal’s capacity could decline by as much as 50%, which would have devastating consequences for global trade and U.S. commerce,” warned Sola.

The hearing notably lacked representation from the Panama Canal Authority, whose Deputy Administrator declined to attend.

The Senate Commerce Committee’s hearing represents a pivotal moment in shaping U.S. policy toward the Panama Canal. While Cruz advocates for enhanced oversight, Panama Canal Authority collaboration, and increased U.S. corporate involvement in canal projects as potential solutions, any U.S. intervention–whether military or diplomatic–could destabilize an already delicate geopolitical situation.

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