The Panama Canal has been fighting extreme weather for the past few years. The El Niño phenomenon and severe drought led to a water level crisis. Now, President Trump’s trade war is threatening the gateway to world trade. A critical passage for the transport of marine cargo containers bound to the US East Coast, the Panama Canal faces a potential business slump as a result of Trump’s Chinese tariffs and a rapid decline in manufactured goods ordered by US shippers.
40% of all US container traffic passes through the Panama Canal every year, and as a whole, travels $270 billion in cargo annually. The US and China are top users of the Panama Canal, and their role in global transportation has increased in recent years due to disruptions in the global supply chain. Panama Canal Bureau’s revenue reached $3.38 billion last year despite drought conditions, and its first income since 2017 has been rising each year.
Trade war uncertainty and Trump’s 145% tariff on Chinese goods – Based on the 4-6 weeks when it starts reaching goods arriving at US ports from China on May 27, US imports from China have been suspended significantly as marine cargo reaches the US from Asia. Data from supply chain intelligence company Project44 shows that blank sailings (cancelled cargo ships) from China to the US have increased by 300% since Trump’s so-called “liberation day” tariffs announced on April 2.
The US West Coast port has already been hit, and the impact on East Coast port is expected to increase, with the pullbacks of ships being the result of a decline in production orders at factories in China.
For the Asia-to-North American East Coast trade route, the marine gut recorded cumulative blank capacity of 261,822 21 feet of comparable units (TEUs) over the past six weeks. This decline in containers and vessels could affect revenues in the Panama Canal. The Panama Canal makes money from the number of transits and containers on ships that travel through the waterways.
“As nearly 75% of our cargo enters and out of the United States, recessions around the world and in the US will somehow affect the Panama Canal,” said Boris Moreno, vice president of operations at the Panama Canal Bureau.
According to the American Society of Civil Engineering, one of the “seven wonders of the modern world,” the canal has been a lightning bolt for controversy in recent years in the battle for global hegemony between the United States and China. Trump claims that the canal’s main ports are controlled by China, threatening to reaffirm our control over the canal and accusing Panama of charging excessive interest rates. China, along with the Panama government, has denied these claims.
Secretary of State Marco Rubio and Secretary of Defense Pete Hegses have both visited with officials from the government of Panama over the past few months.
“I think Panama has been getting closer to China and closer to the US over the past five years,” Federal Maritime Commissioner Louis Sora said in an interview with CNBC earlier this year. At least you need to play the game. ”
Panama Canal Bureau manager Ricaulte Vazquez told CNBC that he is reviewing Trump’s concerns as the US is the world’s largest economy.
“Whatever is said in Washington has an impact on the whole,” Vazquez said. “We’re cool, calm and trying to collect.”
“It is not true that we are run by Chinese people. It is not true that we distinguish between interest rates. It is not true that 38,000 people will die in the construction of the Panama Canal. Anyone who wants to sail the Panama Canal is open to the world. It is a neutral treaty.
In March, an investment group led by US company BlackRock announced it was about to buy two ports at either end of the canal, and attempted to buy a port of around 40 people from Hong Kong-based CK Hutchison. The outcome of the transaction remains unknown.
