Chinese Influence in the Panama Canal: A Growing Threat to American Businesses

In the geopolitical chess game of 2025, the Panama Canal stands as a critical chokepoint, not just for global trade but for the escalating rivalry between the United States and China. Recent threats from the U.S. administration to reclaim or exert control over the canal highlight deep concerns over Beijing's expanding footprint in Panama. This influence isn't abstract—it's manifesting through massive infrastructure investments and trade dominance, directly challenging American economic interests. As U.S. businesses, from shipping giants to lottery operators like Scientific Games, navigate these waters, the risks of disruption, regulatory backlash, and lost opportunities are mounting. Let's dive into how China's strategic moves are reshaping the landscape and what it means for American enterprises.

The Rise of Chinese Influence Around the Panama Canal

China has methodically built its presence in Panama over the past decade, transforming from a minor player to the canal's second-largest user after the United States. Bilateral trade between China and Panama has exploded, surging from $6.38 billion in 2016 to $12.84 billion in 2024, while Chinese investments have grown more than fivefold. Key projects underscore this encroachment:

• A $1.3 billion port terminal on the Atlantic side, enhancing China's logistical reach.

• A $1.4 billion contract for a fourth bridge across the canal, awarded to a Chinese firm, boosting connectivity and influence.

• Operations by Hutchison Ports, a Hong Kong-based company with deep ties to mainland China, managing key ports adjacent to the canal.

These aren't mere economic ventures; they're part of China's Belt and Road Initiative, aimed at securing global supply chains and strategic assets. U.S. officials, including Senator Marco Rubio, have warned Panama to curb this influence or face American action, citing risks to sovereignty and security. China denies any operational control, insisting it respects Panama's independence, but the facts paint a picture of growing leverage that could be weaponized in future conflicts. Clashes at the United Nations in August 2025 amplified these tensions, with the U.S. labeling Chinese activities a "threat to global trade."

U.S. Threats and the Broader Geopolitical Standoff

The current U.S. administration's rhetoric, including threats to "retake" the canal or impose severe measures, stems directly from fears of Chinese dominance. President Trump's statements in early 2025 framed this as a counter to Beijing's Belt and Road encroachments, with military options even floated. Panama's leadership has pushed back, affirming the canal's neutrality under the 1977 treaties, but the standoff has unified regional opposition to perceived U.S. imperialism while highlighting China's subtle gains.

This isn't just diplomatic posturing. If China gains further sway—through more infrastructure deals or economic dependencies—it could disrupt U.S. trade flows, which rely on the canal for 5% of global commerce. Analysts warn that adversarial control could inflict economic damage by hiking fees, delaying shipments, or prioritizing Chinese vessels.

How This Affects American Businesses

The ripple effects on U.S. companies are profound, particularly those with operations in Panama or dependent on the canal. Trade disruptions could lead to a "business slump," with East Coast-bound freight facing delays and higher costs, impacting sectors like manufacturing, retail, and agriculture. Broader economic repercussions include strained supply chains, as seen in early 2025 disputes that echoed global chokepoint crises.

Take the lottery and gambling sector as a prime example. Scientific Games LLC, a U.S.-based firm, held a 10-year concession (extended to 2033) for Panama's electronic lottery systems, like Lotto and Pega 3, providing tech to modernize operations and boost revenue. However, in 2024, Panama's president ordered its cessation amid claims of opacity and poor returns, leaving the deal in limbo as the Supreme Court reviews its legality. While no direct Chinese ties exist here, the broader tensions amplify risks: Panama's tax haven status already invites U.S. scrutiny for money laundering and tax evasion, and escalating U.S.-China rivalries could lead to boycotts, sanctions, or forced divestments for American firms entangled in the region.

For businesses like Scientific Games, this means potential contract losses, legal battles, and reputational damage if perceived as complicit in a geopolitically charged environment. Wider implications? U.S. companies might face higher barriers to entry in Latin America, where China's investments offer alternatives, eroding market share and innovation edges. The canal's stability, contributing $2.5 billion to Panama's budget in 2024, is at stake—if tensions boil over, American exporters could see billions in added logistics costs.

Navigating the Storm Ahead

Chinese influence in the Panama Canal isn't a distant threat—it's a present reality reshaping U.S.-Panama relations and jeopardizing American business stability. As the administration pushes back, companies must brace for volatility: diversified supply chains, lobbying for diplomatic resolutions, and eyeing alternatives like the Suez or rail routes. Ultimately, this standoff underscores a larger battle for global influence. For U.S. businesses, the key is agility—adapt or risk being sidelined in this high-stakes game.