US Defense Secretary Pete Hegseth’s visit to Panama marks a rare and highly significant trip, the first of its kind by a U.S. defense chief in decades. The visit comes at a time when geopolitical tensions are rising due to China’s growing commercial influence around the Panama Canal, and President Donald Trump’s controversial assertions about reclaiming control of the canal.

Backdrop: US-Panama Ties in a Sensitive Phase

Hegseth’s visit is taking place in the shadow of President Trump’s statements implying a desire to "take back" the canal, which was officially handed over to Panama in 1999. The United States originally constructed and managed the canal, but under the 1977 Torrijos-Carter Treaties, Panama took full control by the end of the 20th century.

Trump’s rhetoric has sparked unease in Panama, a country still adjusting to balancing its strategic and economic ties with both Washington and Beijing.

China’s Expanding Footprint Near the Panama Canal

A major concern for U.S. defense and intelligence agencies is China’s expansive commercial presence in Panama, including significant infrastructure investments. These include plans by Chinese companies to build a bridge over the Panama Canal and operate port facilities on both ends of this crucial waterway.

Although Trump falsely claimed Chinese military control of the canal, experts admit that Beijing’s surveillance potential and economic leverage pose legitimate strategic risks.

Over 40% of U.S. container traffic—valued at approximately $270 billion annually—passes through the canal, underlining its critical role in U.S. trade and military logistics.

Panama's Belt and Road Exit: A Shift in Alliances

Panama President Jose Raul Mulino recently announced the country’s exit from China’s Belt and Road Initiative, a clear shift towards aligning more closely with the United States. This development was welcomed in Washington as a countermove to China’s growing influence in Latin America.

Mulino has also cooperated with Trump’s hardline immigration policies, accepting deportation flights and supporting efforts to stem illegal migration through the Darien Gap, a notorious jungle corridor between Colombia and Panama.

Security Stakes: Why the Canal Matters Militarily

Beyond trade, the Panama Canal holds critical military value for the United States. In the event of a conflict in Asia, U.S. Navy vessels would rely on the canal to rapidly move between the Atlantic and Pacific oceans.

Experts warn that even if China doesn’t block access, the ability to monitor naval traffic could provide a tactical edge in surveillance and intelligence gathering.

BlackRock Deal and the "Reclaiming" Narrative

In a recent move celebrated by Trump, U.S.-based investment giant BlackRock acquired a majority stake in the global ports business of Hong Kong’s CK Hutchison, including assets on either side of the Panama Canal. Trump framed the deal as a sign that the U.S. is "reclaiming" strategic influence in the region.

However, China responded with regulatory pushback, and its market regulator has initiated an antitrust review of the deal, indicating rising economic friction between the two superpowers.

Internal Divides Over Treaty Interpretations

Former U.S. Ambassador to Panama John Feeley challenged Trump’s approach, emphasizing that there has been no violation of the neutrality treaty between the U.S. and Panama. He criticized the bullying tone of Trump’s rhetoric, arguing that it undermines diplomatic relations and does not reflect treaty reality.

Panamanian officials, including President Mulino, continue to stress that the canal remains under sovereign Panamanian control and that its operation has been responsible and beneficial for global trade.

A Diplomatic Balancing Act for Panama

Panama finds itself at the center of a strategic tug-of-war between the world’s two largest economies. While U.S. officials see President Mulino as a partner in resisting Chinese encroachment, the economic importance of Chinese investments in Panama remains undeniable.

This geopolitical balancing act requires delicate diplomacy, and Hegseth’s visit is viewed as an opportunity to reaffirm U.S.-Panama ties while addressing security concerns in a non-confrontational manner.

The Bigger Picture: US Influence in Latin America

The visit also serves as a signal to other Central and Latin American nations that the United States is willing to engage proactively to counter Chinese influence in the region. As the global power dynamic evolves, control and access to strategic assets like the Panama Canal will remain at the heart of international competition.

What Lies Ahead

As Hegseth proceeds with his visit, Panama and the global community will be closely watching for policy signals on military cooperation, infrastructure partnerships, and economic influence.

Whether this trip results in tangible changes in the U.S.-Panama relationship remains to be seen, but it has already elevated the Panama Canal back into the center of U.S. strategic calculations—two decades after its official handover.

In conclusion, the Hegseth visit reflects the shifting geopolitical chessboard, with the Panama Canal once again becoming a focal point in the growing rivalry between the United States and China. The outcome of this visit may have long-lasting implications for trade, security, and diplomacy in the Western Hemisphere.

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