For more than a century, the Panama Canal has played a vital role in global trade. Control of the canal was transferred to Panama in 1999 under the Torrijos-Carter Treaties (1977),^[1]1 (1978)
Panama Canal Treaty. This document can be found in HeinOnline’s Foreign & International Law Resources Database. marking a major shift in U.S.-Panama relations. In recent weeks, the canal has become a focal point of geopolitical tension. The Trump administration has raised concerns over rising toll costs and foreign influence, particularly from China. In response, the Panamanian government has pushed back, insisting that it remains fully in control and rejecting any outside interference. This debate has renewed questions about the legal frameworks governing the canal, the implications for global trade, and how international law applies to disputes over important waterways.

U.S. Involvement in Constructing and Managing the Canal

The Panama Canal serves as a critical waterway for global trade, connecting the Atlantic and Pacific Oceans and facilitating the movement of goods between major economies. The origins of the canal trace back to the early 20th century when the United States took over the project after a failed attempt by France. In 1903, the U.S. supported Panama’s independence from Colombia and soon after signed the Hay-Bunau-Varilla Treaty,^[2]Panama Canal, . 33 Stat. 2234 (1903). This document can be found in HeinOnline’s U.S. Statutes at Large. giving the U.S. the right to build and permanently control the canal. Completed in 1914, the project was a massive engineering achievement that became essential to U.S. trade and military operations throughout the 20th century.

Image source: Thomas Römer/OpenStreetMap data, by Thoroe, licensed under CC BY-SA 2.0

For decades, the canal was managed by the Panama Canal Zone,^[3]Francis Newton (Compiler and Editor) Thorpe. Federal and State Constitutions Colonial Charters, and Other Organic Laws of the States, Territories, and Colonies Now or Heretofore Forming the United States of America (1909). This document is … Continue reading a U.S.-controlled territory that operated independently from Panama’s government. This arrangement led to growing tensions, as many Panamanians viewed U.S. control as a challenge to their national sovereignty. Protests and diplomatic efforts throughout the mid-20th century eventually pushed both nations to renegotiate the canal’s governance.

The Torrijos-Carter Treaties and the Transfer of Control

In 1977, U.S. President Jimmy Carter and Panamanian leader Omar Torrijos signed the Torrijos-Carter Treaties,^[4]1 (1978) Panama Canal Treaty. This document can be found in HeinOnline’s Foreign & International Law Resources Database. laying the groundwork for the canal’s gradual transfer to Panama. These treaties established two key agreements:

1. The Panama Canal Treaty^[5]Panama Canal Treaty, 33 U.S.T. 39 (1977). This document is available in HeinOnline’s U.S. Treaties and Agreements Library. – This treaty transferred control of the canal from the U.S. to Panama, with a phased transition that ended in 1999. It also dissolved the U.S.-controlled Panama Canal Zone and established Panama’s full authority over canal operations.
2. The Neutrality Treaty^[6]Tratados Sobre el Canal de Panama Suscritos entre la Republica de Panama y los Estados Unidos de America (1979). This document is available in HeinOnline’s World Treaty Library. – This ensures the canal remains open to ships from all nations during both peace and war, with Panama overseeing its operations. However, it also allows the U.S. to take military action if the canal’s neutrality is at risk, a clause that has led to much debate over its meaning.
   

After more than 20 years of transition, Panama officially assumed control of the canal in 2000, marking a significant milestone in the country’s history.

The Establishment of the Panama Canal Authority (ACP)

Once Panama gained full control of the canal, it established the Panama Canal Authority (Autoridad del Canal de Panamá, ACP)^[7]1 NAFTA: LAW & BUS. REV. AM. 158 (Spring 1995). This document is available in HeinOnline’s Law Journal Library. to manage its operations. The ACP is a government-owned, but independently run, entity responsible for setting policies, collecting tolls, and overseeing expansions and maintenance of the canal. Since taking over, Panama has invested heavily in modernizing the canal, including a major expansion completed in 2016^[8]A Period of Change in the Americas, 252 MANAGING INTELL. PROP. 46 (2015). This document is available in HeinOnline’s Law Journal Library. that accommodates larger ships and has helped increase trade volume.

Current Dispute: U.S. vs. Panama

Today, the canal is a crucial part of Panama’s economy, generating billions in revenue and supporting global trade networks. However, its strategic importance has also made it a focal point for global powers, contributing to the latest tensions between the United States and Panama, over governance, toll rates, and foreign influence. The Trump administration has raised strong objections to certain aspects of Panama’s control, while the Panamanian government has firmly asserted that it maintains full authority over the waterway.

U.S. Concerns

The Trump administration has pointed to two key issues regarding the Panama Canal:

1. Toll Policies – U.S. officials have raised concerns that Panama’s toll rates for shipping may be unfairly high, increasing costs for American companies that rely on the canal for trade. Some have argued that these fees could be limiting U.S. economic competitiveness in global markets.
2. Foreign Influence, Particularly from China – Another key concern is China’s increasing investments In Panama and their potential influence^[9]171 Cong. Rec. S305 (01/23/2025). This document is available in HeinOnline’s U.S. Congressional Documents. over the canal. Panama insists the Panama Canal Authority (ACP) manages it independently, but the U.S. worries that Chinese investments in Panamanian ports and infrastructure could give China too much control.

In response to growing concerns over Panama’s management of the canal and potential foreign influence, U.S. lawmakers have introduced specific legislation:

• Panama Canal Repurchase Act of 2025 (H.R. 283)^[10]To Authorize the President to Enter into Negotiations for the Reacquisition of the Panama Canal from the Republic of Panama: Referred to the Committee on Foreign Affairs, House of Representatives, One Hundred Nineteenth Congress, First Session, H.R. … Continue reading -This bill, introduced in the House of Representatives, authorizes the President to negotiate with Panama for the reacquisition of the Panama Canal. The President is required to report to Congress within 180 days on the progress and potential challenges of such negotiations.
• Senate Resolution 54 (S.Res. 54)^[11]Expressing the Vital Importance of the Panama Canal to the United States: Referred to the Committee on Foreign Relations, House of Representatives, One Hundred Nineteenth Congress, First Session, S. RES. 54 (2025). This document is available in … Continue reading – This Senate resolution emphasizes the strategic importance of the Panama Canal to the United States. While it doesn’t propose specific actions, it reflects the Senate’s recognition of the canal’s significance to U.S. interests.

While still in the early stages, these legislative efforts highlight the growing concerns in Washington.

Panama’s Response

Panama’s government, led by President José Raúl Mulino, has strongly denied the Trump administration’s concerns, insisting that Panama alone controls the canal and no foreign power has undue influence over its operations.

1. Sovereignty Over the Canal – President Mulino has made it clear that Panama has full control of the canal under the 1977 Torrijos-Carter Treaties, which transferred control from the U.S. to Panama. He has stated that the Panama Canal Authority (ACP) operates independently, setting policies and tolls based on economic and operational needs, not outside influence.
2. Rejection of Foreign Intervention – Panama has firmly rejected the idea that the U.S. should have any influence over the canal’s management. Government officials maintain that China, like any other country, is simply a user of the canal, subject to the same tolls and regulations.

With the U.S. raising concerns and legislative actions in motion, Panama has signaled their intent to seek broader international recognition of their control over the canal. While diplomatic negotiations remain ongoing, Panama has indicated that it could take its case to the United Nations (UN) to reaffirm its sovereignty over the canal, though no formal request to convene has been made. Under the UN Charter, every nation has the right to govern its own territory without outside interference. If Panama were to escalate the issue to the UN General Assembly or Security Council, the dispute could shift from a bilateral issue to one of global significance, with Panama framing it as a sovereignty issue and the U.S. emphasizing trade security and geopolitical stability.

As the situation develops, the role of international law and legal bodies will be critical in determining how this dispute is handled. However, beyond legal arguments, economic and geopolitical forces continue to shape the future of the canal.

Global Trade and Geopolitical Impact

The Panama Canal is more than just a critical shipping route—it is also a focal point in the ongoing global competition between economic superpowers. China’s investment in Panama, particularly in ports and infrastructure, have fueled concerns among U.S. officials, who worry that Chinese influence could challenge American strategic interests in the region.

After diplomatic discussions with Washington, Panama withdrew from China’s Belt and Road Initiative (BRI),^[12]Jahnavi Daga, Arihant Sethia & Sakshi Chaplot, Belt and Road Initiative: An Economic Analysis, 2 JUS CORPUS L.J. 219 (June-August 2022). This document is available in HeinOnline’s Law Journal Library. and declined to renew a key infrastructure agreement with China. While Panama maintains that this was an independent decision, China has expressed disappointment, suggesting the move was made under U.S. pressure.

Beyond geopolitics, the economic implications of the dispute extend far beyond Panama’s borders. The canal remains one of the most important trade corridors in the world, facilitating commerce between major economies including Japan, the European Union, and Latin America. Since its expansion in 2016, the canal has accommodated larger vessels, increasing global trade efficiency. However, rising toll rates, geopolitical tensions, and potential trade disruptions could have a ripple effect on global supply chains.

Panama Canal with locks connecting Atlantic and Pacific for global commerce.

Conclusion & Additional Resources

The ongoing dispute over the Panama Canal reflects the intersection of law, trade, and global power struggles. While the U.S. raised concerns about security and economic influence, Panama asserted its right to self-governance. As diplomatic talks, legislative proposals, and international considerations unfold, the outcome of this dispute could set a precedent for the future of global trade and sovereignty over key international waterways.

For those looking to explore the historical and legal context of this issue in greater depth, HeinOnline offers an extensive collection of resources, including treaties, historical documents, and scholarly analyses on the Panama Canal, U.S.-Panama relations, and global geopolitical dynamics. A catalog search for “Panama Canal” in HeinOnline returns over 300 titles. Pro Tip: Save this search query in your MyHein account to get notified whenever HeinOnline adds new content!

For even more historical context, you can also check out our earlier post Secrets of the Serial Set: Constructing the Panama Canal.

Dive into HeinOnline and start exploring! Here are a few resources to help you get started:

• Legislative History of the Panama Canal Act of 1979. P.L. 96-70^[13]Legislative History of the Panama Canal Act of 1979 P.L. 96-70. 5v. Washington: Arnold and Porter, 1979. This is available in HeinOnline’s U.S. Treaties and Agreements Library.
• Legislative History of the Panama Canal Treaties^[14]Legislative History of the Panama Canal Treaties. 11v. Washington: Covington & Burling, 1977-1979. This is available in HeinOnline’s U.S. Treaties and Agreements Library.
• Treaties and Acts of Congress Relating to the Panama Canal^[15]Treaties and Acts of Congress Relating to the Panama Canal. 2 v. Mount Hope, C.Z.: Panama Canal Press, 1922-1934. This is available in HeinOnline’s World Treaty Library.
• The Meaning of the New Panama Canal Treaties (1977)^[16]Meaning of the New Panama Canal Treaties (1977). This document is available in HeinOnline’s U.S. Treates and Agreements Library.
• And much more!

These materials provide valuable insights into the legal foundations and historical developments that continue to influence the Panama Canal’s role in international affairs.