The Panama Canal sits at the nexus of international political and economic concerns. Following the Canal’s expansion in 2016, the waterway annually registers nearly 14,000 transits, a value equal to 6 percent of global trade. The Canal’s global shipping role has only increased amid the disruption of global supply chains during the Covid-19 pandemic and U.S. calls for nearshoring away from China. The United States remains the top user of the Canal—in 2019, 66 percent of the cargo traffic transiting the Canal began or ended its journey at a U.S. port; cargo from or destined to China made up 13 percent of Canal traffic. Still, China is the primary source of products going through the Colón Free Trade Zone and its increasing presence in and around the Canal has made the waterway a flashpoint for U.S.-China competition over spheres of influence. China’s influence in the Panama Canal has only grown since 2017 when then-president Carlos Varela severed diplomatic ties with Taiwan and recognized China, further opening the door to China’s expanded footprint in critical Canal infrastructure and laying the groundwork for alignment with the Belt and Road Initiative (BRI).
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