The Panama Canal crisis isn’t over yet

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President Donald Trump wants the Panama Canal back. However, he might be walking into his own version of the Cuban missile crisis. Amid the heated exchanges between the United States and Panamanian presidents, the diplomatic twist that hasn’t been reported is that Chinese state-owned entities COSCO and China Merchants are reportedly trying to buy a 20% stake in Hutchison Ports, the Hong Kong company operating the terminals at either end of the canal that are the subject of the dispute.

The seller of the 20% stake is PSA International, the port company of Singapore. COSCO tried to buy PSA’s share in 2023, but PSA put the sale on hold because it thought the price, $4 billion, was too low. Late last year, PSA reportedly resumed the sale, supposedly asking for $5.4 billion.

Singapore’s government tries to obscure its control of PSA by calling it a private company. That’s technically true because PSA is entirely owned by an investment company, Temasek. However, Temasek is the Singapore government’s investment company. So, the U.S. should also remind and perhaps press Singapore not to sell its stake in Hutchison to COSCO.

If the U.S. launched the campaign to retake the canal without accounting for the activities of COSCO and PSA regarding Hutchison — and the role of Singapore in any deal — the administration set out on the campaign at a disadvantage.

COSCO achieving part ownership of the company operating key terminals on the Panama Canal would be a post-globalization version of the Cuban missile crisis. If the U.S. were to try to block such a sale, COSCO, China, Panama, and Singapore could each claim, independently of each other, that the U.S. was interfering in a private market transaction.

At best, that would be a bad look for U.S. claims about the rule of law. At worst, it could leave the U.S. diplomatically isolated, perhaps even facing the risk of “riots all over Latin America,” as Henry Kissinger warned the U.S. faced in the 1970s if it did not agree to return the canal to Panama. That could impede U.S. efforts to roll back China’s maritime front in Latin America and other regions.

If COSCO were to acquire PSA’s stake in Hutchison, it would also call into question Singapore’s reliability as an ally, assuming the U.S. urged Singapore to block the sale. However, Hutchison is on the block, and COSCO is buying. It recently nabbed some Hutchison terminals in Thailand. China’s imperial expansion is proceeding full steam ahead in an island-hopping fashion.

If the U.S. pressures Panama to cancel Hutchison’s contracts, it would be a limited win, leaving the U.S. with the canal as a sort of moat against China’s steady expansion of its maritime front line into the Western Hemisphere. COSCO opened a new port in Peru in November despite strong U.S. objections, and it just added a new route connecting Mexican ports to the Far East. Hutchison runs four terminals in Mexico.

Chinese President Xi Jinping is almost certainly being briefed about the situation. China had already condemned what it called “coercion” after Panama notified China that it would not renew its participation in the Belt and Road Initiative.

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China may already be in touch at some level with Singapore about a potential COSCO-Hutchison deal, perhaps reminding Singapore that containers now shipped through Singapore can be rerouted through Shanghai, just as containers that used to travel through terminals in Hong Kong now move through Chinese mainland ports.

The Panama Canal crisis isn’t over yet, and it may be only the first stage of a wider conflict about whether the U.S. can contain China’s control of the world’s commercial maritime logistics network, which so many countries depend on for trade and economic growth.

Christopher O’Dea is an adjunct fellow at the Hudson Institute, where he recently completed Ships of State, a book that reveals how Beijing has used its state-owned commercial maritime companies to build a network of influence.

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