Federal shipping regulators say agricultural trade was particularly affected by last year’s drought in the Panama Canal as ships struggled to retain access through an auction process set up to manage capacity. The comments come amid renewed scrutiny from the Trump administration and lawmakers over China’s presence in the region and economic and security threats.
President Donald Trump has made multiple threats to retake control of the Panama Canal — a vital artery for U.S. agriculture trade —in recent weeks. In his inaugural address last week, the president accused the Panamanian government of violating a treaty preserving neutral access to the canal, despite Panama’s insistence that no country’s vessels receive special treatment.
During his confirmation hearing earlier this month, Secretary of State Marco Rubio also raised concerns over a Hong Kong-based company’s operation of two ports near the canal’s Pacific and Atlantic Ocean mouths.
But in a Senate Commerce, Science and Transportation Committee hearing on Tuesday, senators and members of the Federal Maritime Commission flagged the challenges U.S. agriculture trade has faced as a result of the canal’s administrative practices.
The agriculture and food sector has been particularly impacted by low water levels that plagued the canal in 2023, Commissioner Daniel Maffei said. During periods of low water and drought, fewer ships can travel on the canal, and those that can must hold lighter cargo loads. In these instances, the Panama Canal Authority manages capacity by giving out some prebooked slots to vessels and auctioning off the rest to the highest bidder.
“The challenge there is every kind of commodity, every kind of ship, is bidding,” Maffei said. Liquefied natural gas shippers, with deeper pockets, can outbid container shippers carrying agricultural products and other consumer goods.
Daniel MaffeiU.S. soybeans are the canal's leading agriculture customer, Mike Steenhoek, executive director of the Soy Transportation Coalition, told Agri-Pulse in an email this week. Cotton, livestock and dairy products are also prominent users, Joseph Kramek, president and CEO of the World Shipping Council, told lawmakers during the hearing.
Sen. Lisa Blunt Rochester, D-Del., complained that fruit importers in her state were suffering from shipment delays and suggested that the canal authorities could do more to expedite perishable food shipments.
“We've been looking into that, but it does remain a large concern,” Maffei told Blunt Rochester. “How do we figure out a way for these agricultural shippers, who are not the main players on these ships but an important part of it, particularly for the United States?”
The situation for U.S. agriculture shippers could worsen if the bidding process is not amended. The canal loses 1-2% of its water each year, FMC Chair Louis Sola told lawmakers. The FMC, he said, has spoken with Panama’s government and the canal authority about the need to add fresh water to the system and avoid water loss.
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“If they continue this way, the Panama Canal will be severely diminished by up to maybe 40% by 2050,” Sola said.
Senators from both parties also expressed concerns over China’s growing presence around the canal. Ranking Member Maria Cantwell, D-Wash., said she was troubled by Hutchison Port Holdings, a Hong Kong-based company, operating ports on either side of the canal. Chinese-manufactured telecommunications equipment installed nearby also posed security issues, she added.
Sen. Maria Cantwell, D-Wash.Committee Chair Ted Cruz, R-Texas, raised the issue of Chinese companies’ involvement in constructing a bridge across the canal, which multiple lawmakers argued could be used to block the canal without warning.
“The larger issue here,” Cantwell said, is Beijing’s expansion into critical global infrastructure through its Belt and Road Initiative.
Chinese companies have invested in 129 port projects outside of China and control a majority stake in 17, according to the Council on Foreign Relations.
“Their expansion needs to be met with an aggressive response by the United States,” Cantwell said.
The Panamanian government would welcome U.S. companies doing more of the infrastructure work on and around the canal, Maffei argued. But he said U.S. companies struggle to compete with the heavily subsidized Chinese firms and often don’t bid for the projects.
The repeated attacks from Trump have spurred some action from Panama, however. The government has announced an audit of the two Hutchison Port operating contracts, which are set to expire in 2046.
Under the terms of the canal’s handover from the U.S. to Panama, the canal has to remain neutral, showing no preference to any nation in fee structure. Panama must also retain control the canal and ensure no foreign military presence, said Eugene Kontorovich, a professor at Scalia Law School at George Mason University.
Asked whether he knew of any instance where U.S. vessels had been singled out by the canal authorities, Maffei said he did not, but added that as the largest user of the canal, the U.S. is disproportionately affected by any fee hikes.
The treaty, however, contains no third-party verification or resolution mechanism, Kontorovich pointed out. Each party is free to determine for itself whether the other party has violated the treaty. Accordingly, Trump could argue that contracts with Chinese or Hong Kong-based companies are considered “suspect and incompatible with the neutrality regime," Kontorovich said, and cancel or withdraw from the treaty.
Even if Trump does decide that Panama has violated its neutrality commitments and cancels the treaty, the canal would not necessarily return to U.S. ownership, Kontorovich stressed.
“Concessions that have to do with sovereign control are not particularly reversible,” Kontorovich said. The U.S. can take measures to ensure neutrality, but “territorial control is not a clear remedy,” he concluded.
