Panama Considers Withdrawing from Port Deal with Hong Kong Firm After Trump's Canal Offensive

Panama is considering canceling its contract with Hutchison Ports PPC, a Hong Kong-based firm that President Donald Trump and Secretary of State Marco Rubio have labeled a national security threat due to its expanding presence in the Panama Canal amid rising tensions between the U.S. and China.

While no decision has been made, anonymous sources told Bloomberg that the government of Panama is weighing the possibility of canceling the contracts. President José Raúl Mulino has not yet commented on the matter.

The development comes after Rubio's visit to Panama, where he told President Mulino that steps must be taken to curb China's "unacceptable" influence over the US-built canal.

Even though the Panama Canal is run by an autonomous entity overseen by the Panamanian government, the U.S. government claims China exerts influence through a Hong Kong-based company that operates ports on both ends of the waterway.

"People will argue, well, that's not China; that's a company based in Hong Kong. Well, a company based in Hong Kong is the Government of China. You are not a company in China if the Chinese Government doesn't control you," Rubio said in an interview with conservative journalist Megyn Kelly.

"If there's a conflict and China tells them 'do everything you can to obstruct the canal so that the U.S. can't engage in trade and commerce, so that the U.S. military and naval fleet cannot get to the Indo-Pacific fast enough'—They would have to do it, and they would do it. And now we'd have a major problem on our hands," he added.

During Rubio's visit, President Mulino announced that his government would withdraw from China's signature lending program, Belt and Road Initiative, which finances infrastructure across several continents. The Panamanian leader added that U.S. warships would be granted free passage through the canal, addressing a complaint by former President Donald Trump, who said the U.S. Navy was paying "exorbitant" rates to pass through.

During his inauguration speech, Trump vowed to take back the Panama Canal. The president claimed that the U.S. has "been treated very badly by this foolish gift that should have never been made," referring to an agreement with the Latin American country that would eventually lead to Panama retaining full control of the canal.

He further claimed that "China is controlling the Panama Canal" and said, "We're taking it back." Trump has accused Panama of favoring China over the U.S.

According to Bloomberg, about 75% of the cargo transiting through the Panama Canal goes to or from the US, making it the biggest beneficiary of the route.