Why We Lost the Panama Canal and How Trump Might Reclaim it

Just before Christmas, President-elect Donald Trump ignited a media firestorm when he announced in a Truth Social post that he may demand that the government of Panama return control of the Panama Canal to the United States. Here’s why Panama controls the canal in the first place and why Trump is right to be concerned about its current management.

The Panama Canal, which stretches 51 miles from the Atlantic to the Pacific, is one of the greatest engineering feats in world history and a testament to American ingenuity and determination. Despite plans and attempts at building a canal across the Isthmus of Panama going back to the 16th century, no nation was able to overcome the technical hurdles or the deadly conditions necessary to finish it.

The successful completion of the canal was primarily thanks to the efforts of President Theodore Roosevelt, who recognized that an American-controlled canal would not only benefit U.S. commerce but also better position the United States to control global trade.

When Roosevelt first set his sights on starting construction, the area of the eventual canal zone was under the control of the Columbian government, which had no intention of turning over the land to American interests. So, Roosevelt struck a deal with Panamanian rebels – in exchange for backing their revolution, deploying American gunboats to the region, and recognizing a permanent Panamanian state, America would gain control of the proposed canal site and surrounding areas. The strategy famously became known as “gunboat diplomacy.”  

Construction began in 1904 and lasted for a decade. At the Gatun Locks on the Atlantic side, workers poured enough concrete to build a wall 8 feet wide, 12 feet high, and 133 miles long. They built culverts the size of railroad tunnels to channel water from Gatun Lake into the locks. Pittsburgh’s furnaces roared as more than 50 mills, foundries, and machine shops churned out the rivets, bolts, nuts, girders, and other steel pieces the canal builders needed.

The United States spent an unprecedented $375 million on the project – about $14 billion in today’s dollars. The American government paid Panama’s fledgling government $10 million for the canal zone and $250,000 per year in “rent.”

While there is no reliable estimate for the total number of Americans who worked on the canal, at the peak there were 56,000 workers, engineers, and technicians were involved in the construction. About 6,000 Americans died in the effort, mostly due to disease. Despite these significant losses, the canal opened in 1914, immediately cutting shipping times between New York and San Francisco by two weeks. More importantly, the canal signaled to the world that the United States had become a great economic power.

Following the canal’s completion, the United States managed the Panama Canal Zone, overseeing its operations and maintenance. The canal became a vital artery for international maritime trade, with the U.S. benefiting economically and strategically from its control.

However, everything changed in 1977. Several years prior to that, the democratically elected Panamanian government had been overthrown in a far-left coup by military leadership. After the seizure of the legislature, newspapers, and all political activity, Omar Torrijos emerged as the de-facto leader, naming himself “Maximum Leader of the Panamanian Revolution.”

The Panama Canal was designed, built, and maintained exclusively by the United States. Nevertheless, Torrijos demanded it be given to Panama and nationalized.

After promising during his 1976 campaign that he would not surrender “practical control of the Panama Canal Zone any time in the foreseeable future,” the late President Jimmy Carter quickly changed his tune after assuming office. On March 16, 1977, Congress formally ratified the Torrijos-Carter Treaties that gave Panama immediate control of the canal. Further, the treaties forced the United States to defend and protect it militarily until December 31, 1999.

Supporters of the treaty perceived it as a “magnanimous” gesture that would foment a permanent alliance. But critics – including one Ronald Reagan – warned that Carter’s surrender of the canal was an enormous strategic blunder that would jeopardize American economic and geopolitical interests for decades.

Nearly 50 years after the Torrijos-Carter Treaties were signed, Carter’s critics – and Trump – have now been completely vindicated.

As The New York Times reported earlier this month, Chinese companies now control two of five major ports at the canal’s entrances. Those companies “likely have data on all ships coming through the Panama Canal.” Since 73 percent of all ships coming through the canal are going to or from U.S. ports, this presents a serious threat of Chinese espionage. In another ominous sign, Panama cut diplomatic ties with Taiwan in 2017 and recognized mainland China, signaling Beijing’s growing influence.

Costs to transit the canal have also surged in recent years. Those costs have been passed on to American taxpayers, as the canal is the primary route for U.S. Navy ships to travel from the West Coast to the East Coast. As Trump wrote on Truth Social, “A secure Panama Canal is crucial for U.S. Commerce, and rapid deployment of the Navy.”

Moreover, Trump continued, the canal was not given to Panama “for the benefit of others, but merely as a token of cooperation with us and Panama. If the principles, both moral and legal, of this magnanimous gesture of giving are not followed, then we will demand that the Panama Canal be returned to us, in full and without question.”

Like Teddy Roosevelt, more than a century ago, Trump recognized the critical importance of the canal to American interests, both from an economic and national security standpoint. Like Reagan a generation ago, Trump also recognizes how much blood and treasure Americans spent to build the canal in the first place – and why the country still has a legitimate claim to it today.

Andrew Shirley is a veteran speechwriter and AMAC Newsline columnist. His commentary can be found on X at @AA_Shirley.