Panama Disputes US Claim of Free Canal Transit for Government Ships Amid Rising Tensions

The Panama Canal Authority (ACP) has refuted a statement from the US State Department claiming the Central American nation had agreed to waive transit fees for US government vessels using the vital waterway, CNN reports.

The denial comes amid escalating tensions between the two countries, fueled by recent remarks from former President Donald Trump regarding the future of the canal and concerns over China’s increasing influence in the region.

“In response to a publication released by the United States Department of State, the Panama Canal Authority…reports that it has not made any adjustments” to its toll system, the ACP said in a press release.

The authority, responsible for setting tolls and fees, added that it remains open to dialogue with the United States.

The State Department had earlier posted a message on X, accompanied by a photo of a US naval vessel, saying:

“US government vessels can now transit the Panama Canal without charge fees, saving the US government millions of dollars a year.”

According to the Panamanian Embassy in Cuba, the US has paid $25.4 million in transit fees for warships and submarines over the past 26 years – an average of less than $1 million annually.

The disagreement follows a period of heightened diplomatic friction. On Sunday, Trump reiterated his desire to “take back” the Panama Canal, warning of “powerful” US action and claiming China was “running” the canal. He stated the canal was “given to Panama foolishly.”

The State Department’s now disputed announcement had initially appeared to be a step towards easing tensions, particularly after Secretary of State Marco Rubio’s recent meeting with Panamanian President Raúl Mulino. While Mulino affirmed Panama’s sovereignty over the canal was non-negotiable, he also indicated that Panama would address Washington’s concerns regarding China’s influence. This included a commitment to not renew a 2017 memorandum of understanding to join China’s Belt and Road initiative, and a suggestion the deal could be terminated early.

The Panama Canal was returned to Panama in 2000 under a 1977 treaty, which grants the US the right to intervene militarily if the canal’s operations are disrupted. Since then, the ACP has independently managed the waterway, with cargo traffic exceeding levels seen during U.S. control.

Concerns about Chinese influence stem, in part, from the operation of terminals on both the Atlantic and Pacific sides of the canal by Panama Ports, a subsidiary of Hong Kong-based CK Hutchison Holdings. Hutchinson was granted the concession in 1997, when the canal was jointly administered by Panama and the US.

Hutchison is a publicly traded company, not currently on any US blacklists. Its subsidiary, Hutchinson Ports, is a major global port operator, managing 53 ports in 24 countries, including those of US allies such as the UK, Australia and Canada. Hutchison does not control access to the Panama Canal itself.