Trump demands a re-reading of the 'neutrality' of the Panama Canal

report SRA 2025 / [ pdf and English version ].

√ After his first official trip to Panama, framework Rubio said he had agreed to toll-free transit for the Navy, something denied by the Panamanian government.

√ The gratuity for US warships could be justified on the US and Panama's mandate to ensure navigational safety.

√ Other exceptions, such as a lower price for U.S.-linked goods, would not fit in the current Agreement, which only provides exceptions for Colombia and Costa Rica.

Since his re-election, Donald Trump has set his sights on the Panama Canal. At his inauguration on January 21, 2025, the U.S. president was explicit: "Panama's promise to us has been broken. The purpose of our agreement and the spirit of our treaty have been completely violated. U.S. ships are paying grossly excessive prices and are not receiving fair attention in any way. And that includes the U.S. Navy. And, most of all, China operates the Panama Canal. And we didn't give it to China. We gave it to Panama, and we're taking it back.

The fact that after some concessions made by the Panamanian government (such as a change of hands in the management of the two main ports of the canal, until now operated by a Chinese business , and the exit of the Central American country from the Silk Road agreement that linked it to Beijing), Trump continues to persist in his threat (as he did before the joint session of congress on March 4), Trump continues to persist in his threat (as he did before the joint session of congress on March 4), raises doubts as to whether the maximalism of recovering the canal is merely rhetorical or whether the U.S. president really intends to go all the way (an end that would not be peaceful). It has been reported that the White House hasordered the Pentagon to draw up plans to secure US 'access' to the Canal.

It is foreseeable that Panama, just as it has sought to satisfy the United States in relation to the Chinese presence, will also take some steps to grant preferential attention to Americans in their transit through the Canal. The question is how to get there in the light of existing treaties.

The Torrijos-Carter Treaties, signed between Panamanian President Omar Torrijos and U.S. President Jimmy Carter in 1977, consist of two documents: the Panama Canal Treaty and the Treaty of Neutrality ('Treaty Concerning the Permanent Neutrality of the Canal and the Operation of the Panama Canal'). The former fixed the terms and date for the transfer of control of the Canal from the United States to Panama, while the latter reinforced the concept of permanent neutrality of the Canal, guaranteeing its access to all ships under fair and equitable conditions. These agreements, fully consummated with the transfer of Canal sovereignty to Panama at the end of 1999, marked a milestone in the history, politics and foreign relations between the two countries.

The Neutrality Treaty establishes in its first article that "the Canal, as an international transit waterway, shall be permanently neutral in accordance with the regime established in this Treaty". Since its ratification, both signatory countries have fully respected their rights and obligations under the treaty. Washington had never accused Panama of not respecting a neutrality that the US now suggests is threatened by the presence of Chinese interests in that country. Although there was no legal basis for the White House to denounce the breach of the agreement and demand the return of the canal, the distancing from China being carried out by the Panamanian government eliminates any pretext in that sense.

Exception for Colombia and Costa Rica

Although neutrality refers to security aspects, it could also be understood as a commitment not to favor any nation over another. article II of the Treaty of Neutrality states: "Panama declares the neutrality of the Canal so that, both in time of peace and in time of war, it shall remain safe and open for the peaceful transit of vessels of all nations on terms of complete equality, so that there shall be no discrimination against any nation or its citizens or subjects concerning the conditions or costs of transit or for any other reason.

However, the same Treaty gives attention of favor to Colombia and Costa Rica, Panama's neighbors to the south and north. Colombia, of which the Panamanian territory was a part until 1903, had already obtained free use of the canal for its warships and products from the United States from the very beginning. The Torrijos Carter Treaty expressly left the door open for Panama to maintain this privilege for Colombia and introduced the possibility of doing the same for Costa Rica.

Specifically, point 2 of article VI of the Treaty of Neutrality states: "The United States of America, as long as it is manager of the operation of the Canal, may continue to grant to the Republic of Colombia the right of free transit through the Canal for its troops, vessels and war material. Thereafter, the Republic of Panama may grant the Republic of Colombia and the Republic of Costa Rica the right of free transit". Both countries signed bilateral treaties with Panama (the Colombians in 1979 and the Costa Ricans in 1980) developing this issue, which includes both military and commercial transport.

The only exceptions contemplated in the Treaty are for those two countries, so that any advantage that Panama may end up granting the United States in relation to the price of transit tolls through the canal - certainly in terms of the transport of goods - would possibly have to be contemplated in a new treaty. The fact that the current treaty discriminates against some countries, for historical and neighborhood reasons, is a logic that could very well be extended to the United States if such an agreement were to be reached in a new document.

Warships

However, based on the present treaty, without the need for reform, perhaps it would be possible for Panama to stop charging tolls to United States warships, since point 1 of the same article VI gives the United States the responsibility of guaranteeing the security of the Canal: "In recognition of the important contributions of the Republic of Panama and the United States of America to the construction, operation, maintenance, protection, and defense of the Canal, warships and auxiliary vessels of these nations, notwithstanding other provisions of this treaty, shall have the right to transit the Canal regardless of their internal operation, means of propulsion, origin, destination, armament, or cargo. Such warships and auxiliary vessels shall have the right to transit the Canal in an expeditious manner".

This is precisely what the US Secretary of State, framework Rubio, requested during his visit to Panama at the beginning of March 2025, on his first official trip abroad. The State department later announced that it had achieved this goal - Rubio argued that "it is absurd that we have to pay fees to transit through an area that we are obliged to protect in times of conflict" - but the Panamanian president, José Raúl Mulino, rejected these claims, assuring that there had been no agreement in this regard.

According to the Trump Administration, if the exemption were enforced, the United States would save millions of dollars a year. However, over the past 26 years, only 994 crossings correspond to the passage of U.S. Navy ships and submarines, representing $25.4 million collected in tolls (less than $1 million per year).

Good management and own investment

Over the past 25 years, the administration of the Canal under Panamanian sovereignty has demonstrated exceptional efficiency. Under the Panama Canal Authority (ACP), operations have improved significantly, with shorter transit times, fewer accidents and a major expansion in 2016. The United States, as the canal's main Username , has benefited from these improvements without assuming the costs of maintaining colonial control and allowing it to show goodwill toward the Latin American neighborhood. The problems caused by the drought in 2023, which forced a reduction in the transit cargo Issue , have been overcome with proposals for improvements in case the negative effects of climate change are accentuated.

The Panama Canal expansion, completed in 2016, cost approximately US$5.25 billion, contributed by Panama and the investors it managed to involve, making it the largest infrastructure project in the country's history since its original construction. This expansion significantly increased Panama's income and influence in international trade.

When Trump calls for the return of the Canal to the United States, one might respond that the canal that the U.S. once gave to Panama no longer exists. Would the U.S. take over all the new infrastructure that the Panamanians subsequently built, without any input from Washington?