Shipping could face a major disruption if Trump is not bluffing about taking back the Panama Canal. Hopes that the Hutchison sale would placate the US and solve the problem have been dashed. US PRESSURE on Panama is not letting up in the wake of the blockbuster sale agreement for Hutchison’s terminals, including Balboa and Cristobal at either end of the canal, Lloyd's List reports.
“To further enhance our national security, my administration will be reclaiming the Panama Canal. We’re taking it back,” affirmed US President Donald Trump in his speech to Congress on March 4 — after the Hutchison deal was announced.
NBC News reported on Thursday that Trump has directed the US military to increase its presence in Panama and draw up various options, including greater military cooperation with Panama at one end of the spectrum and a seizure of the canal by force at the other.
On Friday, the Federal Maritime Commission launched a new investigation into the world’s shipping chokepoints, including the Panama Canal, which could theoretically impact the future ability of Panama-flagged ships to call at US ports.
FMC probe adds to pressure on Panama
The FMC said it is investigating “constraints that have affected transits” through seven chokepoints: the English Channel, Malacca Strait, Northern Sea Passage, Singapore Strait, Panama Canal, Strait of Gibraltar and Suez Canal.
“During periods of high demand, congestion leads to delays, causing costly disruptions to global supply chains,” said the FMC on the Panama Canal, adding that this waterway is prone to droughts that impact “functionality and efficiency”.
“The Panama Canal also holds substantial geopolitical importance, crucial to the interests of the United States. Political instability or disruptions in its operations could have far-reaching consequences,” it said, specifically drawing a connection to Trump’s rhetoric.
The FMC said it has the statutory power “to address conditions unfavourable to shipping in US foreign trade” caused by “laws, regulations or practices of foreign governments” and remedies include “refusing entry to US ports by vessels registered in countries responsible for creating unfavourable conditions”.
It further noted that the Panama Shipping Register “is one of the world’s largest ship registries, with over 8,000 vessels reportedly registered”.
If the US barred Panama-flag ships from its ports, it would spur a mass reflagging to other registries such as the Marshall Islands and Liberia, and deprive Panama’s government of a large source of revenue. It would also disrupt trade to the US if there was not enough lead time.
The mere suggestion of such a possibility could be viewed as a geopolitical pressure tactic.
“The authority that the FMC has could be used as another tool in the Panama discussion,” said Lauren Beagan, a former FMC attorney and founder of Squall Strategies, in an interview with Lloyd’s List on Friday.
“This could be a leverage point. That’s kind of what we’re seeing — getting negotiating leverage. So, it could be part of that.
“It’s not surprising that it is being brought into the conversation,” she continued. “These are authorities that the FMC has had, although these are authorities that have only been used with a light touch through the years.
“With the amount of attention that maritime has gotten in this administration, it isn’t surprising that they also found this authority and are finding ways to utilise it. It just makes sense. If you are kind of picking through your toolbox and this one hops up and you’re like, ‘Wow, have we ever really used this? Well, not really. All right. Well, let’s see how this works.’
“I think that the FMC is taking the first step,” Beagan said of the shipping chokepoint investigation. “This is a big step, but they’re just taking the first step of information gathering. It’s still just an investigation, not a determination.”
Concerns were raised during the recent TPM25 conference that the FMC, an independent bipartisan agency, could lose its independence in light of Trump’s February 18 executive order asserting control over “so-called independent agencies”.
Beagan still believes the FMC maintains its independence. “The way I read it is that they [the Trump administration] just have final review over final rule-making actions, so that independent agencies aren’t making determinations completely on their own in a vacuum, without some sort of executive branch review.”
More panamax transits, fewer neopanamax transits in February
The FMC investigation points to earlier disruptions at the Panama Canal due to drought. During a Senate hearing on the Panama Canal in late January, FMC commissioners confirmed they had previously considered action against the Panama flag in relation to multi-million-dollar slot auctions during the 2023-2024 drought.
But canal operations have been running smoothly for many months. High auction prices are a thing of the past. There is no congestion.
According to transit statistics* released Thursday by the Panama Canal Authority (ACP), there were 975 transits in February, down 4% from January. However, last month had three fewer days than the prior month, so transits per day increased 7% month on month in February, to 34.8.
There were 237 transits via the larger ACP-built neopanamax locks, down 17% month on month due to 9% fewer containership transits during the Chinese New Year holiday period and 31% fewer transits by very large gas carriers.
There were 8.5 neopanamax locks transits per day, down 9% month on month.
The smaller, older panamax locks handled 738 transits last month, up 2% versus January. Transits per day came in at 26.3, up 13% month on month.
Dry bulk cargoes from the US Gulf to Asia were the big driver of monthly gains in the panamax locks. There were 193 dry bulk carrier transits via the panamax locks in February, up 16% from the month before (up 29% when accounting for the shorter month). This was the highest number of monthly panamax dry bulk transits since April 2023, prior to drought restrictions.