Why Panama Canal Sparked War of Words Between China and the Americas

China has touched sensitivities in Latin America after ramping up detentions of Panamanian ships in what is widely viewed as retaliation over the seizure of two Panama ports previously leased to Hong Kong-based CK Hutchison.

Five countries in Latin America and the Caribbean joined the United States on Tuesday in issuing a joint statement, saying they were monitoring “China's targeted economic pressure and the recent actions that have affected Panama-flagged vessels.”

“These actions-following the decision of Panama's independent Supreme Court regarding the Balboa and Cristóbal terminals-are a blatant attempt to politicize maritime trade and infringe on the sovereignty of the nations of our hemisphere,” it said.

Panama-flagged ships accounted for 91 of the 123 detained for inspections in March by China’s state port controllers, according to Loadstar's analysis of records released by 22 maritime authorities in the Asia-Pacific region.

In February, China detained only 45 ships, of which 19 were Panamanian.

Latin American Solidarity

China is the second-largest trading partner for Latin America, trailing only the United States, and the largest for South America. Beijing's increasing clout has heightened competition in a region Washington has long considered its backyard.

Though only a handful of countries-Bolivia, Costa Rica, Guyana, Paraguay, and Trinidad and Tobago-signed onto the statement, China's strong response against Panama has undercut its pitch as a favorable alternative to the United States, whose popularity has dipped in parts of the region amid the hardline policies of President Donald Trump.

China's Foreign Ministry on Wednesday insisted that the inspections were routine and in accordance with laws and regulations.

“It is the United States that has politicized and securitized the port issue, and it is the United States that has pretended to be sympathetic and spread rumors everywhere to smear it,” spokesperson Lin Jian said. “China’s position on Panama’s port issue is clear and will firmly safeguard its legitimate rights and interests.”

Port Pain

The dispute traces back to January 29, when Panama's Supreme Court nullified concession contracts granted since 1997 to Panama Ports Company (PPC), a CK Hutchison subsidiary, for the Balboa and Cristóbal terminals, citing irregularities.

PPC denounced the move as an “unlawful takeover,” citing damages exceeding $2 billion and is pursuing legal action.

The decision capped a year of tug-of-war over the Central American country and the Panama Canal-a 50-mile-long waterway through which flows about 5 percent of global seaborne trade. There’s been an increase since the Strait of Hormuz has been effectively closed to most commercial shipping in the Iran war.

The U.S. built the Panama Canal between 1904 and 1914, creating a significantly faster alternative Atlantic-Pacific route than going around Cape Horn in southern Chile, and ceded full control to Panama in 2000.

The U.S. relies most heavily on the canal, which serves 40 percent of the country’s container traffic, and the U.S. Navy relies on it to move ships between the Pacific and Atlantic oceans.

Trump and other administration officials have repeatedly warned of Chinese influence over the canal, a claim that China and Panama have denied.

While Washington lauded the court's decision, Beijing warned of “heavy prices.” China then directed state-owned enterprises to suspend new investments in Panama and ordered state-owned shipping giant COSCO to stop accepting cargo bound for the Balboa ports.

China's state planner, the National Development and Reform Commission, also pressured Mediterranean Shipping Company and Danish shipping group Maersk to halt operations at the ports.

Panamanian authorities subsequently granted subsidiaries of both firms temporary operating licenses for Balboa and Cristóbal, respectively.

Newsweek reached out to the Chinese Embassy in the United States and the U.S. State Department by email for comment.

Economic Coercion

China's detainment of ships is a message to others about the costs of harming Chinese firms, Evan Ellis, a research professor at the U.S. Army War College Strategic Studies Institute who specializes in China-Latin America ties, told Newsweek.

CK Hutchison is a Hong Kong-based company, and despite efforts by its founder to shift assets and re-register flagship firms in offshore jurisdictions, Beijing still views such entities through a national lens.

Despite this, “China to some degree views all of its major companies as Chinese companies-some under more direct control than others, whether they are national state-owned enterprises, provincial SOEs, or private,” Ellis said.

“At the end of the day I think China’s message is, regarding the protection of all companies that may be seen as Chinese one way or another, ‘If you act against the interests of other countries there will be a cost, so you’d better think twice before doing so.'”

It would not be the first time China has harnessed its economic weight to punish a smaller country over perceived political or economic slights.

In 2020, China suspended beef imports from several Australian meat processors, halted imports of Australian cotton, and imposed an 80 percent tariff on Australian barley after Canberra called for an inquiry into the origins of COVID-19. Many of those measures were only lifted years later.

In 2010, China froze imports of Argentine soybean oil for six months to signal displeasure over Buenos Aires' anti-dumping investigations into Chinese goods and canceled a planned state visit by then-President Cristina Fernández de Kirchner.

“I think the protest by six countries reflects sensitivity across the region to violations of Latin American sovereignty and a willingness to speak out despite concerns of offending China,” Ellis said, adding that while the U.S. may not directly benefit, it positions China to “win less.”

“China is showing itself to be a bully, as it is known to do in places such as the South China Sea and in its repression of democratic protesters in Hong Kong,” he said.

Panamanian President José Raúl Mulino hailed the statement on social media.

“I appreciate the solidarity of friendly countries regarding the problem faced by Panamanian ships in Chinese ports,” he wrote.

“Our decisions are based on a ruling by the Supreme Court as an independent body of the State. We do not seek controversy, as we value respectful relations with all nations.”

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This story was originally published May 2, 2026 at 2:00 AM.