In March, during a joint address to Congress, U.S. President Donald Trump declared that the United States would be “reclaiming” the Panama Canal and “taking it back.” The remarks prompted outrage in Panama, a small country with a history of U.S. incursion.
Behind Trump’s rhetoric lay a series of demands. He accused Panama of overcharging U.S. shippers. The Defense Department floated the idea of reviving U.S. military bases in the country, which had lapsed late last century alongside U.S. control of the canal. Washington also flagged northward migration through Panama as a concern.
But the real flash point was China. Trump falsely claimed that Beijing controlled the canal, while other officials zeroed in on nearby port facilities operated by a Hong Kong-based conglomerate. In February, on his first overseas trip as secretary of state, Marco Rubio pressed Panama to curb its economic and diplomatic ties with China.
At first, the pressure seemed to work. Facing U.S. threats of territorial takeover, Panamanian President José Raúl Mulino conceded to a slate of U.S. asks. Panama’s government agreed to detain people deported by the United States in a remote jungle camp and tighten controls on migration through the Darién Gap, a dense borderland with Colombia. Panama also cooled ties with China, becoming the first Latin American country to exit Beijing’s Belt and Road Initiative. And despite Chinese protests, the Panamanian government placed lucrative port-management contracts under review, prompting a sale to U.S. investor BlackRock.
The Trump administration claimed a swift victory. But U.S. presidents have a history of overplaying their hand in Panama. Threats to canal sovereignty—only fully exercised by Panama since 1999—strike a raw nerve in the country, which until the late 1990s hosted thousands of U.S. troops and was invaded by the United States just a generation ago. As before, Washington’s heavy-handed approach risks provoking public backlash and undermining U.S. interests throughout the region.
A 1905 political cartoon of U.S. President Theodore Roosevelt at the Panama Canal, titled “The Man Who Can Make Dirt Fly.” Bettmann Archive/Getty Images
Trump did not invent hardball diplomacy with Panama: U.S. respect for Panamanian sovereignty has long come with strings attached.
Well before Panama gained independence from Colombia in late 1903, foreign powers coveted the isthmus’s strategic position between the Atlantic and Pacific oceans. In the late 19th century, the United States, Britain, and France competed for rights to operate railways there—and, eventually, to build a canal. In 1881, a French company launched an ambitious construction project to do just that.
By the turn of the 20th century, however, the French efforts had failed due to engineering issues, tropical disease, and mismanagement. Sensing an opening in early 1903, the United States struck a deal with the Colombian foreign minister and representatives of the French company for exclusive rights to build and operate a canal on a 100-year lease. But Colombia’s Senate shot it down.
Furious, then-U.S. President Theodore Roosevelt backed Panamanian separatists and dispatched the U.S. Navy to block Bogotá from retaking its rebellious province. U.S. support for Panama’s independence came at a price: A representative of the failed French company, acting on behalf of the young Panamanian government, handed Washington perpetual control of the canal and the 10-mile wide zone surrounding it, to be held as “if it were the sovereign.”
When word reached Panama City, the government tried to renegotiate. But Panama’s fragile independence depended on Roosevelt’s goodwill, so the country’s leaders backed down from protesting the deal. On Panama’s streets, though, the issue was far from settled. Recurring protests accompanied U.S. canal construction efforts. Demonstrators demanded Panamanian sovereignty and decried unequal working conditions in the Canal Zone.
To clear the area, the United States displaced thriving Panamanian towns and brought in foreign laborers, who were seen as cheaper and more pliable than Panamanians. The Canal Zone operated under Jim Crow-style segregation. White “Zonians” lived under one set of rules, while Panamanians were relegated to another.
Left: A group of laborers look out to sea from the Gatun Locks during the construction of the Panama Canal, circa 1915. Right: Workers at the base of the gate to the Gatun Locks, circa 1910. Archive Photos/Hulton Archive/Getty Images
For decades, the United States ran a dual payroll system: White U.S. citizens were paid on the “gold roll,” while Panamanians and foreign workers were stuck on the “silver roll.” A 1950 study noted that, in 1947, “the average annual silver wage was $950; the average annual gold wage was $3,800.” Gold roll employees also received superior benefits, including paid vacations, better housing, and access to clubs and free entertainment.
The canal opened in August 1914, just as Europe plunged into World War I. Throughout the following decades, U.S. military bases that were ostensibly built to protect the canal also served as platforms for projecting Washington’s power across Latin America and the Caribbean. But frequent clashes between Panamanians and U.S. troops fueled public anger.
The United States’ overbearing military and economic presence in Panama fractured the country’s politics. Some elites thrived on U.S. largesse, but local businesses were largely shut out of major Canal Zone contracts.
Resentment over recurring inequalities coalesced around Arnulfo Arias, a populist who won the presidency three times—in 1940, 1949, and 1968—only to be ousted by coups on each occasion. Although U.S. involvement in the coups remains debated, Washington clearly viewed Arias as a liability. (Arias’s 1940 campaign slogan, “Panama for the Panamanians,” was not aimed solely at the United States; he trafficked in xenophobia and flirted with fascism, railing against the Canal Zone in part because it boosted the country’s nonwhite population.)
For many Panamanians, the issue was one of indignity: A foreign superpower occupied a strip of land running through the heart of their country. Riots in 1959 forced the Eisenhower administration to permit greater display of Panama’s national symbols in the Canal Zone, prompting outrage from American Canal Zone residents and voters back home.
“The U.S. public generally saw itself as the unfairly beleaguered benefactor, the softly walking Goliath to Panama’s unruly, stone throwing David,” wrote historian Alan McPherson.
That disregard prefigured the more explosive riots of 1964. A flag dispute between Zonian and Panamanian students outside a Canal Zone high school quickly spiraled into a full-blown crisis. Canal Zone police opened fire on Panamanian protesters, and the violence spread. Eager to save face in an election year, President Roberto Chiari broke diplomatic ties with Washington.
Panamanian high school students fight with Canal Zone police over a torn Panamanian flag on Jan. 9, 1964.Bettmann Archive/Getty Images
The 1964 flag incident turned the Panama Canal into a sacred national cause and forced U.S. President Lyndon Johnson to the negotiating table with Chiari’s successor. Draft treaties offered limited concessions, but they proved so unpopular in both countries that they were never submitted for ratification. To this day, Panamanians killed in the protests are commemorated in an annual patriotic celebration of Martyrs’ Day.
Four years later, the third coup against Arias brought Panamanian National Guard leader Omar Torrijos to power. He quickly shelved the proposed U.S. deals and turned the canal into a political platform. At the United Nations, Torrijos shamed the Nixon administration before a decolonizing world; he also tapped into regional resentment to keep pressure on Washington.
Torrijos’s strategy—and growing star power—paved the way for the 1977 Torrijos-Carter Treaties, which would eventually end the U.S. occupation of the Canal Zone. While the United States retained a permanent role in defending the canal from external threats, the treaties did not allow U.S. military bases to be hosted in Panama beyond 1999.
But the treaties did not end Panama’s troubles with the United States. In 1989, amid a standoff with Torrijos’s successor, dictator Manuel Noriega, President George H.W. Bush launched a full-scale invasion to arrest him. The operation was facilitated by the U.S. military presence in the Canal Zone.
The United States framed the invasion as a low-cost win that brought Noriega to justice and democracy to Panama. Few Panamanians mourned his fall. But U.S. claims of minimal casualties remain hotly contested, with locals pointing to widespread destruction in Panama City’s poorest neighborhoods.
At the time, many Panamanians feared that Bush’s war was a pretext to derail the canal handover and maintain a military presence. That did not happen, but the idea of hosting U.S. forces remains politically toxic in Panama.
A demonstrator waves the flag of Panama during a protest against the inauguration of U.S. President Donald Trump outside the residence of the U.S. ambassador in Panama City on Jan. 20. Arnulfo Franco/AFP via Getty Images
Today, Washington’s high-pressure tactics risk setting the stage for eventual backlash against U.S. interests. In the short term, Trump has undercut Mulino—who, by virtue of his right-wing and business-friendly credentials, could have been a key U.S. ally. But Mulino now faces disapproval from almost three-quarters of Panama’s population, according to polling conducted in June.
Instead, U.S. tactics have boosted Mulino’s opponents. Foremost among them is Torrijos’s son, former President Martín Torrijos, whose U.S. visa the Trump administration recently canceled. The younger Torrijos has advocated moving closer to China to offset Panama’s dependence on the United States.
More immediately, U.S. pressure has supercharged nationalist civil society, pushing Panamanians into the streets once again. Amid growing protests, Mulino will need to show that he can push back against U.S. demands—something that Chiari learned in 1964 and that Torrijos intuitively understood.
If the United States wants lasting influence over the Panama Canal, it cannot afford to alienate the Panamanian public. Since Panama cut ties with Taiwan in 2017, Beijing has demonstrated steady, pragmatic engagement in a way that Washington has not. Disregarding public sensibilities only strengthens China’s hand.
Trump’s bluster has made China look like the more reliable partner. Beijing is advancing its interests in Panama through trade and investment, not ultimatums and saber-rattling. And others in the region are watching. Humiliating Panama’s president might win Washington a battle, but it risks losing the wider contest for influence.
