The Panama Canal Dispute and the Unfolding Diplomatic Storm: Panama Refutes U.S. State Department’s Claims on Fee Exemptions for Military Vessels

In a striking contradiction to claims made by the U.S. State Department, Panama has firmly denied any agreement to waive transit fees for U.S. government vessels passing through the Panama Canal. The rebuttal, issued by the Panama Canal Authority (ACP), underscores the independent governance of the crucial waterway and highlights the growing diplomatic tensions between the two nations.

On Wednesday, the State Department asserted in an official statement that Panama had agreed to exempt U.S. military ships from transit fees, a move purported to save the U.S. government millions annually. The announcement, posted on X alongside an image of a U.S. naval vessel navigating the canal’s locks, was met with swift repudiation from Panama.

“In response to a publication released by the United States Department of State, the Panama Canal Authority, which is authorized to set tolls and other fees for transiting the Canal, reports that it has not made any adjustments to them,” read ACP’s statement. While expressing openness to dialogue with the U.S., the authority maintained that no such exemptions had been granted.

The stark disparity between the two statements raises critical questions about miscommunication or potential misrepresentation on the part of the U.S. State Department. Over the past 26 years, the U.S. has paid a modest $25.4 million in transit fees—an average of less than one million dollars annually—for the passage of its warships and submarines, according to Panama’s embassy in Cuba.

Geopolitical Undercurrents: Trump’s Resurfaced Canal Agenda

The controversy emerges against the backdrop of President Donald Trump’s recent remarks, reigniting an old political flashpoint. Trump’s assertion that the U.S. must “take back” the Panama Canal has sent shockwaves through diplomatic circles, hinting at escalating U.S. concerns over China’s presence in the region.

“China is running the Panama Canal that was not given to China, that was given to Panama foolishly, but they violated the agreement, and we’re going to take it back, or something very powerful is going to happen,” Trump declared on Sunday.

His statement follows Secretary of State Marco Rubio’s diplomatic visit to Panama, where he engaged in discussions with President Raúl Mulino. While Mulino reassured Washington that Panama’s sovereignty over the canal was non-negotiable, he acknowledged concerns over China’s influence in the region.

China’s Presence and the Canal’s Strategic Importance

The underlying anxiety driving these developments stems from China’s economic footprint in Panama. Though Panama Ports—a subsidiary of Hong Kong-based CK Hutchison Holdings—operates terminals on both the Atlantic and Pacific sides of the canal, the company does not control access to the waterway. Its global operations extend to 53 ports across 24 countries, including key U.S. allies such as the UK, Australia, and Canada.

Nevertheless, U.S. policymakers remain wary of Beijing’s growing clout in the region. In a significant policy shift, Panama has opted not to renew its 2017 memorandum of understanding under China’s Belt and Road Initiative, suggesting a recalibration of its ties with Beijing.

Historical Perspective: The Treaty and U.S. Leverage

The Panama Canal’s return to Panamanian control under the 1977 Torrijos-Carter Treaties marked a historic shift, officially transferring oversight to the Panama Canal Authority (ACP) in 2000. However, the treaty still grants the U.S. the right to intervene militarily if the canal’s operations face disruptions due to internal conflict or foreign interference. This clause remains a key point of leverage for Washington as concerns over regional stability persist.

Diplomatic Crossroads: What Lies Ahead?

The unfolding dispute presents a critical test for U.S.-Panama relations. While the ACP remains steadfast in its authority over transit fees, the broader diplomatic undertones point to a strategic recalibration of regional alliances. Washington’s growing concerns over Chinese influence in the canal’s vicinity may shape future policy decisions, but any direct attempt to reassert U.S. control over the canal would undoubtedly trigger a significant geopolitical crisis.

With tensions simmering, the world watches closely as Panama asserts its sovereignty and the United States navigates its next diplomatic move in this high-stakes chess game of global influence.