Panama is in full crisis-management mode as Panama US China tensions escalate.

Yesterday, Carlos Luiz Hernandez, Panama’s Vice Minister of Foreign Affairs, met with Trump administration officials to begin round one of what can only be described as damage control.

And for Panama, the timing couldn’t be worse.

The US Wants China Out of Panama

For those who haven’t been following closely, the U.S. has made it abundantly clear: China’s influence in Panama has gone too far. According to Lou Sola and other expert witnesses at Tuesday’s Senate hearing, this isn’t a recent shift—it’s been happening for nearly a decade.

And as someone who has seen Chinese influence grow here over the last 10 years, I have to say that the US is not entirely wrong. China has secured significant infrastructure projects in Panama, including the controversial bridge project that was a focal point of the Senate discussion. The project byt the way has been riddled with delays and is now a symbol of China’s expanding footprint in Panama.

So, what’s the U.S. angle? It boils down to three key concerns from Trump’s camp:

1. Canal tolls are too high and are inflating the cost of goods for US consumers
2. China’s influence over Panama is increasing
3. Chinese companies operating on the Canal could potentially shut down the Panama Canal during a conflict

Having watched the entire Senate session, read through the expert reports, and spoken with colleagues in both the shipping and diplomatic sectors, here’s my take on where things stand.

The Hutchison Ports Controversy

Let’s go back to 1997 when Hutchison Ports (PPC), a Chinese company, won the bid to manage two strategic ports on the Panama Canal—one on the Pacific side and one on the Atlantic. And if you know China, you know that 99% of companies operating internationally have ties to the government.

The contract, which is baked into Panama’s constitution, runs through 2047. It was renewed for another 25 years back in 2021. And here’s the kicker—Trump isn’t happy about that. He wants U.S. operators in charge, with companies like SSA Marine or APM (essentially Maersk) stepping in. From a U.S. strategic perspective, this makes sense—if tensions escalate with China, they want control over these crucial points of access.

A bad port operator could, in theory, disrupt operations at the Canal. If China were given the directive, there’s a risk these ports could be used as leverage.

The Senate Hearing Takeaways

One of the more eyebrow-raising moments of the inquiry was when Ted Cruz pressed witnesses on the potential risks to the Panama Canal. The best comparison they could come up with? The Baltimore bridge incident, where a ship accidentally crashed into critical infrastructure. Shut things down, Baltimore was a hot mess. Very disruptive!

The idea that a Chinese worker could sabotage a bridge during construction was floated—but let’s be real, wouldn’t it be easier to just drive a car onto one of our three existing bridges over the canal and set off an explosive? That argument felt like a stretch.

And then there’s the economic angle. The claim that lower Canal tolls would benefit U.S. consumers? Not so much. Let’s take the example of a 5,000-car shipment on a Neo-Panamax vessel. At an 80% load, the cost to cross the Canal is around $1.2 million—roughly $200 per car. Not exactly a game-changer for the average American consumer.

How This Affects Panama Right Now

This crisis couldn’t come at a worse time for Panama, a country just entering its peak 2025 season. And the impacts are already being felt:

✅ Tourism: We’re seeing trip cancellations as U.S. media stirs up concerns about Panama’s stability.
✅ Investment: Some potential investors are backing off, perceiving increased risk.
✅ Financial Sector: International ratings agencies and foreign lenders are watching closely, and the uncertainty is not helping.

Worst-case scenarios? If I had to bet, I’d wager that Panama won’t lose control of the Canal. Global players simply won’t let that happen. The U.S. has bigger geopolitical concerns in the next four years. But Panama? We’re going to have to give in to some of the pressure—because resisting isn’t an option.

What Happens if Panama Caves?

In fact, Panama is already starting to give in.

Earlier this week, before the hearing, the Panamanian government announced a full audit of Hutchison Ports to “review” their agreement. The company employs 5,000 people directly and supports another 25,000 indirectly. Is this setting the stage for a U.S. firm to step in? It sure looks that way.

But transitioning to a U.S. operator would be a mess—politically, economically, and logistically. Kicking out Hutchison and canceling Chinese infrastructure deals would signal instability and weak institutions that dont uphold contract law. Not to mention, U.S. firms are typically more expensive than their Chinese counterparts, which is bad news for a government already dealing with budget shortfalls.

What This Means for Panama’s Real Estate Market

Panama’s economy is already facing headwinds. The government shut down mining operations, creating job losses and income for the government. The social security system is in trouble. And now, with this political and economic uncertainty, where does that leave the real estate market?

In a worst case scenario where there’s a major shake up, we are likely to see job losses which could lead to higher crime. That will definitely keep real estate investors on the sidelines. Budget shortfall issues affect infrastructure, and poor infrastructure affects quality of life for locals and potential expats. Again, not good for the real estate market.

For some, Trump’s presidency has been a reason to consider Panama as an escape from U.S. politics. On the flip side, there are those in the US who support the initiative and believe that a US intervention could be a windfall for the Panamanian economy and Panama’s real estate market.

As a company, we haven’t lost any deals because of this, with the exception of a handful of U.S. owners pulling their Panama listings because they plan to spend more time here than up north. Go figure…

Final Thoughts on the Panama US China Tensions

What this has done for Panama is to force some introspection, some accountability, and a prioritizing of US / China relations, putting the US, for the moment, way ahead of China. So that’s probably a good thing.

And while uncertainty often creates investment opportunities, no one likes this much uncertainty.

Will this all blow over? Let’s see how Marco Rubio’s visit plays out. And if you’re reading this, Senator Rubio—give me a call. I’ll show you a side of Panama that might just make you rethink this whole crackdown.