President Donald Trump emphasized China’s claim to the Panama Canal in his inaugural address.

“China is operating the Panama Canal, but we didn’t give it to China. We gave it to Panama and we’re taking it back,” he said.

The 51-mile (82-kilometer) Panama Canal traverses Central American countries and is the main channel connecting the Atlantic and Pacific Oceans.

Up to 14,000 ships use it as a shortcut each year, and before the canal was built, these ships would have made a long and expensive voyage around the tip of South America.

Mentioning Panama in his inaugural address was not the first time he had focused on the Central American country and its transoceanic canal.

On Christmas Day, Trump posted on social media that “good Chinese soldiers” were “lovingly but illegally operating the Panama Canal” — a claim that was quickly denied by officials in Panama City and Beijing.

At the time, Panamanian President Jose Raul Mulino called the claim “nonsense” and stressed that there was “absolutely no Chinese interference” in the canal.

Trump has also threatened to retake the canal by force over allegedly “exorbitant” fees charged for U.S. ships to pass through it – another charge Panamanian authorities reject.

After Trump delivered his inauguration speech, President Mulino once again emphasized that “no country in the world will interfere with our management of the Panama Canal.”

The strategic waterway handles about 5% of the world’s maritime trade and is run by the Panama Canal Authority, a Panamanian government agency, rather than Chinese soldiers.

Trump’s inaccurate claims, however, reflect concerns among some U.S. officials about China’s significant investment in the canal and surrounding infrastructure.

Historically, the United States has played a key role in the construction and management of the passage connecting the Atlantic and Pacific Oceans.

The United States was awarded the rights to build the project after a French attempt to build it failed. The canal was completed in 1914.

It remained under U.S. control until 1977, when then-President Jimmy Carter signed a treaty gradually handing it over to Panama, which Trump called “stupid.”

Since 1999, the Panama Canal Authority has had exclusive control over the operation of the waterway.

Treaties between the United States and Panama provide for permanent neutrality, but the United States reserves the right to use military force to defend any threat to the canal’s neutrality under the agreement.

There is no public evidence that the Chinese government exercises control over the canal or its military. However, Chinese companies have a significant presence there.

From October 2023 to September 2024, China accounted for 21.4% of the Panama Canal’s transit cargo volume, becoming the second largest user after the United States.

China has also invested heavily in ports and terminals near the canal in recent years.

Two of the five ports adjacent to the canal, Port Balboa and Port Cristobal, on the Pacific and Atlantic sides respectively, have been operated by subsidiaries of Hutchison Ports Holdings since 1997.

The company is a subsidiary of listed CK Hutchison Holdings, a Hong Kong conglomerate founded by Hong Kong businessman Li Ka-shing. It has port operations in 24 countries, including the United Kingdom.

It has port operations in 24 countries, including the United Kingdom.

Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies, said that although the company is not a Chinese state-owned enterprise, Washington has been concerned about how much control Beijing can exert over the company.

There is a wealth of potentially useful strategic information about ships passing through the shipping lanes of these ports.

“Geopolitical tensions of an economic nature are growing between the United States and China,” Berg said. “In the event of a supply chain war, this kind of information about cargo would be very useful.”

CK Hutchison did not respond to the BBC’s request for comment.

Andrew Thomas, a professor at the University of Akron who has written a book about the canal, said bids to operate the ports have faced little competition. “The U.S. didn’t really care about the ports at the time, and Hutchison didn’t face any opposition,” he said.

Chinese private and state-owned companies have also increased their influence in Panama with billions of dollars in investments, including a cruise terminal and a bridge to be built over the canal.

This “bundle of Chinese activity,” as Mr. Thomas described it, may have prompted Mr. Trump to assert that the canal is “owned” by China, but he stressed that operation of the ports did not amount to ownership.

Beijing has stated many times that China-Latin America relations are characterized by “equality, mutual benefit, innovation, openness, and benefit to the people.”

Panama’s strategic location means China has been vying for influence in the country for years and expand its footprint on a continent traditionally considered the United States’ “backyard.”

In 2017, Panama severed diplomatic relations with Taiwan and established diplomatic relations with China. This was a huge victory for Chinese diplomacy.

Months later, Panama became the first Latin American country to join China’s signature Belt and Road Initiative, a multi-trillion-dollar global infrastructure and investment initiative.

The Dominican Republic, El Salvador, Nicaragua and Honduras have also followed suit, cutting ties with Taipei in favor of Beijing.

China has slowly expanded its soft power by opening the first Confucius Institute in the country and providing funds to build railways. Chinese companies have also sponsored “media training” for Panamanian journalists.