Panama Seizes Canal Ports from Hong Kong Firm Amid US-China Rivalry

On February 23rd, Panamanian maritime officials walked into the Balboa and Cristobal ports carrying government seizure orders. Behind them lay 25 years of Hong Kong-based CK Hutchison's operations at these strategic gateways to the Panama Canal. Ahead lay an uncertain future shaped by the escalating rivalry between Washington and Beijing.

The Panamanian government's decree to occupy the ports "for reasons of urgent social interest" marks a dramatic escalation in what has become a proxy battle over one of the world's most critical trade arteries. The seizure encompasses everything from massive cranes to computer software—a complete takeover of operations that handle 6% of global maritime trade.

When Geopolitics Meets Business Reality

The roots of this confrontation trace back to Donald Trump's pointed accusation in 2025 that "China is running the Panama Canal." While technically inaccurate—the canal itself remains under Panamanian control—Trump's rhetoric thrust the Central American nation into the spotlight of US-China competition.

The irony runs deep. CK Hutchison had actually been preparing to sell the ports to a consortium including US investment giant BlackRock. But Chinese government intervention blocked the deal, creating the very scenario Trump criticized. Beijing's attempt to prevent American ownership inadvertently triggered Panama's decision to seize direct control.

Panama's Supreme Court provided the legal mechanism in January, declaring the port concession unconstitutional and invalidating a 2021 extension. While the court didn't specify the constitutional violations, the timing suggests political motivations alongside legal concerns.

The Strategic Stakes

The Panama Canal isn't just about trade efficiency—it's about global power projection. For the US, maintaining influence over this 50-mile waterway connects to broader concerns about Chinese infrastructure investments across Latin America through the Belt and Road Initiative.

For China, access to Panama's ports represents more than commercial interests. It's part of a larger strategy to secure alternative trade routes and reduce dependence on US-controlled chokepoints. Chinese companies have invested heavily in ports from Greece to Sri Lanka, often raising Western concerns about "debt-trap diplomacy."

Panama finds itself caught between these competing visions. The country switched diplomatic recognition from Taiwan to China in 2016, signaling its economic pragmatism. Yet it also depends on the US dollar as its currency and maintains deep historical ties to Washington.

Small Nation, Big Dilemma

Panama's seizure of the ports reveals the complex calculations facing smaller nations in an era of great power competition. President José Raúl Mulino's administration appears to be threading a needle—asserting sovereignty while avoiding complete alignment with either superpower.

The economic implications are substantial. China ranks as Panama's second-largest trading partner, and Chinese cargo represents a significant portion of canal traffic. Meanwhile, the US remains Panama's largest trade partner and a crucial source of investment and tourism.

By taking direct government control, Panama signals it won't be a passive arena for US-China competition. But this approach carries risks. Government-run ports often prove less efficient than private operations, potentially affecting Panama's competitiveness as a logistics hub.

Global Supply Chain Implications

The seizure sends ripples through global supply chains already strained by various disruptions. Major shipping companies that rely on these ports for transpacific routes now face uncertainty about service levels, pricing, and political stability.

For multinational corporations, the Panama situation illustrates how geopolitical tensions can suddenly disrupt established business relationships. Companies increasingly must factor political risk into their supply chain strategies, not just in traditional hotspots but in previously stable regions.

The broader trend is concerning for global trade. As US-China tensions extend beyond tariffs into infrastructure and logistics networks, neutral countries face pressure to choose sides—or risk becoming battlegrounds themselves.