Defense Deal in Panama: A New Move Against Rising Chinese Power?

Defense Secretary Pete Hegseth secures landmark “first and free” passage agreement for U.S. vessels in Panama, delivering a strategic blow to Chinese influence in a region vital to American trade and security.

Key Insights

Secretary Hegseth’s Panama mission secured privileged canal access for U.S. ships, protecting maritime routes that handle over 40% of U.S. trade.
The agreement directly counters China’s growing influence, following Panama’s exit from China’s Belt and Road Initiative negotiated by Secretary Rubio.
A U.S.-led consortium successfully acquired two strategic ports along the canal that were previously controlled by a Hong Kong-based company.
An expanded U.S. military presence in Panama will help secure the canal against foreign threats.

Strategic Victory in Panama

Defense Secretary Pete Hegseth has successfully negotiated a pivotal agreement with Panama, securing “first and free” passage for U.S. vessels through the Panama Canal. This diplomatic achievement came during Hegseth’s official visit to the Central American nation, where he engaged directly with Panamanian leadership to strengthen defense ties and counter growing Chinese influence in the region. The canal remains a critical artery for American economic and military interests, handling approximately 40% of U.S. maritime trade.

The strategic importance of this agreement cannot be overstated, as it comes amid what defense officials describe as deliberate Chinese attempts to gain control over key global trade routes. President Trump identified reducing Chinese influence over the Panama Canal as a priority early in his administration, leading to a coordinated diplomatic effort. Secretary of State Marco Rubio had previously persuaded Panama to withdraw from China’s Belt and Road Initiative, paving the way for Hegseth’s successful mission.

Reclaiming American Influence

During his visit, Hegseth toured former U.S. military bases and critical infrastructure along the canal, demonstrating America’s renewed commitment to the region. The trip culminated in the signing of a formal declaration granting American warships privileged passage through the strategic waterway. This agreement represents a significant reversal of China’s growing foothold in Panama, which had accelerated through targeted investments and infrastructure projects over recent years.

“This trip not only met but exceeded our expectations. A warm welcome from Panama. Great partnership. Spent a lot of time with their troops. I want to thank Panama for what they’ve done in the Darien Gap as well.”

A significant economic victory accompanied the military agreement when a Hong Kong-based conglomerate sold its two ports along the canal to a U.S.-led consortium. Defense officials noted that China attempted to delay this transaction, recognizing its strategic implications. The expanded partnership now includes provisions for increased U.S. military presence in Panama to help secure the canal against potential threats, reinforcing American commitment to regional security.

China’s Response and Future Implications

China has reacted strongly to these developments, accusing the United States of “blackmail” in its dealings with Panama. Despite these accusations, Panamanian officials have reinforced their commitment to the new partnership, demonstrating resilience against Chinese pressure. The agreement marks a decisive shift in regional dynamics, reestablishing American dominance in an area that has historically fallen under U.S. influence since the canal’s construction in the early 20th century.

“If you look at the context countering Chinese spheres of influence around the world, this is a good example of actions taken by the secretary and by this team about how we align perfectly within the realm of that strategy.” – Source

Senior defense officials credited President Trump’s leadership for creating the diplomatic opportunities that made these agreements possible. One official noted, “President Trump’s words have resonated with them in terms of negotiating the bolstering of our alliances.” Hegseth himself expressed confidence in America’s position, emphasizing that U.S. strength serves as an effective deterrent against Chinese ambitions. This Panama agreement represents a key victory in the administration’s broader strategy to secure critical global trade corridors and strengthen international partnerships.