After a series of calibrated Chineseretaliatory actionsincluding tightened shipping inspections, frozen infrastructure projects, internationalarbitrationand disrupted agricultural exports, Panama’s economy began feeling real pain from its decision to exit the Belt and Road Initiative and seize the Hong Kong operated port concessions through lawfare. Facing mounting losses that cost the country millions of dollars per day in transit fees and flag registration revenue, President Mulino suddenlyabandonedhis confrontational posture and attempted to downplay the tone of the conflict in early April.
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By early April, the mounting economic pressure appeared to be producing a shift in tone from Panama City. On April 9, 2026,President José Raúl Mulinosoughtto dial down the confrontation, striking a markedly more conciliatory posture. While his foreign minister had just a day earlier on April 8accusedChina ofretaliatingagainst Panama by stepping up inspections of Panamanian flagged vessels, yet Mulino publicly sought to decouple the technical from the political.
President Mulino wasquotedas saying
“We are not interested in having a problem with China. I hope that this situation de-escalates and that we return to a normality both in the political relationship and in the understanding that this is a problem that will be resolved.”
When asked about Panama flagged vessels being held in Chinese ports, Mulino said such inspections were not unusual in global shipping stating “they have nothing to do with political retaliation,” describing the matter as a “technical issue,” while noting that the inspected cargo and vessels do not belong to Panama itself but are merely flying the Panamanian flag. His remarks don’t mention any substantive policy reversal on the port concession issue, as he only meant to lower the temperature and maintain the image that Panama did not execute economic lawfare because of pressure of the US but China doesn’t seem to be buying it.
In early 2025, Washingtonintensifiedits campaign to curb Chinese influence in Latin America, targeting Panama as a key strategic node.Following heightened United States pressure that included explicit warnings fromSecretary of State Marco Rubio and President Donald Trump, Panama announced in February 2025 that it would not renew its memorandum of understanding under China’s Belt and Road Initiative, becoming the first Latin American nation to exit the program. And the pressure did not stop there as less than a year later, Panama’s Supreme Court, after a review initiated under American scrutiny, declaredunconstitutionalthe long-standingconcessioncontractsunder which aHong Kongbased company, CK Hutchison’s subsidiary, Panama Ports Company (PPC), had operated the Balboa and Cristobal terminals at both ends of the Panama Canal for nearly three decades. In a coordinated move of economic lawfare to bar Chinese entities from any meaningful role in the strategic waterway, Panamanian authorities seized the ports, confiscated company property including private and protected documents, and denied the operator access to its own files and computer systems. Beijingrespondedby condemning the actions as “extremely absurd” and warning that Panama would pay a “heavy price” if it did not correct its mistake, while CK Hutchison initiated international arbitration proceedings, later raising its claim to more than two billion dollars.
What followed in March and April of 2026 constituted a calibrated and multi-layered economic reprisal by China, one that demonstrated Beijing’s ability to impose consequences through commercial and regulatory channels rather than direct confrontation. Chinese shipping giant COSCO suspended its operations at the Balboa port, marking what industry observers identified as the first concrete retaliatory measure following Panama’s forced takeover of the Chinese linked port assets. Domestic Chinese shipping companies began diverting cargo to alternative Latin American ports, costing Panama an estimated 800,000 dollars per day in lost transit fees.
From early March, Chinese customs authorities dramatically ramped up agricultural inspection standards for Panamanian products, directly impacting trade that accounted for roughly 39 percent of Panama’s exports to China, with more than 70 percent of the country’s tropical fruit exports such as bananas and pineapples facing severe disruption. Simultaneously, Chinese authorities begansubjectingvessels flying the Panamanian flag to rigorous inspections and detentions at Chinese ports. Data from the Tokyo Memorandum of Understandingshowedthat out of 124 vessels detained at Chinese ports in March, 92 or nearly 75 percent flew the Panamanian flag, a dramatic increase from previous months. This measure struck directly at Panama’s economic model as the world’s largest flag of convenience registry, which generates annual registration fee revenue of approximately 650 million dollars from more than 8,600 registered vessels, with daily losses estimated at 1.8 million dollars as shipping companies rushed to reflag their vessels.
Beyond the shipping and agricultural sectors,Beijing alsosuspendedall new investment projects in Panama, including the 1.4 billion dollar fourth bridge over the Panama Canal,freezing the country’s long term infrastructure development.
Source: Global Research
