China Tries to Punish Panama After Canal Ports Loss

2026-03-14 - 00:36

A Chinese state-owned shipping company abruptly paused operations at the Panama Canal this week in a move possibly linked to ongoing tensions between the United States and China over the strategic waterway. In a March 10 notice to customers, COSCO Shipping Lines said it was suspending activities with immediate effect at the Pacific port of Balboa. The subsidiary of Shanghai-based COSCO Shipping could not be reached for comment. Costly Business Beijing warned Panama it would pay a “heavy price” after a late-January ruling by its Supreme Court canceled concessions on either end of the canal previously held for nearly three decades by Panama Ports Company (PPC), owned by Hong Kong conglomerate CK Hutchison. Last month, Panamanian authorities took back Balboa in the south and the Atlantic port of Cristóbal in the north, in a move widely seen as a win for U.S. President Donald Trump, who had described the previous longstanding arrangement as an example of Chinese control despite public denials by both Beijing and Panama City. COSCO Shipping Lines is part of the world’s fourth-largest shipping firm by market share. Its decision, coming just 15 days after the Panamanian government kicked out PPC, likely was not a coincidence, said Henry Ziemer of the Center for Strategic and International Studies (CSIS), a Washington think tank. “While there’s no smoking gun that this move was undertaken at the explicit direction of Beijing, the circumstantial evidence overwhelmingly points to a state hand in COSCO’s decision to suspend operation at Balboa,” Ziemer told Newsweek. “Last month, China reportedly asked shipping companies to explore alternative routes to the Panama Canal, and even directed state-owned companies to pause any investments in infrastructure in Panama,” he said. China previously accused Panama of succumbing to U.S. pressure and said its decision would have political and economic consequences. PPC is seeking some $2 billion in damages from the government of Panama, which first granted the 25-year concessions in 1997 and later renewed them in 2021. The Signs COSCO told customers that there would be no further incoming or outgoing traffic at its Balboa terminal after Tuesday, and that all bookings would be canceled. Imports that were already released would be delivered, but empty containers were to be returned to the Manzanillo and Colon terminals in Panama’s northern Colon province, it said. A separate internal directive issued by COSCO, marked “urgent,” ordered receivers to stop accepting cargo bound for Balboa, according to London-based Lloyd’s List, which provides shipping analysis. COSCO has not publicly commented on the suspension and has not informed its customers whether the halt is temporary or permanent. The move could prompt clients to scramble to find alternative arrangements. Ship containers stacked at the Panama Canal’s Balboa port in Panama City A day before the notice, China’s Transport Ministry and its state planner summoned executives of the Danish shipping line Maersk and the Italian-owned Mediterranean Shipping Company (MSC) for meetings about their “business conduct” in the Panama Canal. Lloyd’s said the meetings were connected to the temporary contracts awarded to Maersk subsidiary APM Terminals and MSC unit Terminal Investment Ltd to take over at Balboa and Cristóbal, respectively. “While it is highly unlikely that this changes the outcome of the court’s ruling, China seems to be inadvertently tipping its hand, suggesting that Hutchison’s control over the Panama Canal ports was in fact viewed as a strategic asset for the [People’s Republic of China], not merely a commercial investment by an ostensibly private company,” Ziemer said. “One development to watch for is whether Chinese companies are allowed to bid on the two new port concessions Panama is hoping to open at Corozal on the Pacific coast and Telfers on the Atlantic. While these tenders could be an opportunity for China to regain its influence along the canal, its current belligerence might cost the PRC in the long run,” he said. Big Blow? Revenue from the Panama Canal accounted for over 7 percent of Panama’s GDP in 2025, according to a paper published in the December issue of Research in Transportation Business & Management, a peer-reviewed quarterly journal. More than 20 percent of the Panamanian government’s revenue in the last fiscal year was generated by dividends from canal operations, the authors said. COSCO’s decision was not likely to cause significant disruptions at Balboa port, where Maersk handles up to 80 percent of containers. It does, however, add to the uncertain fate of CK Hutchison’s portfolio of 43 global ports, which it had planned to sell to a consortium led by the U.S. asset management giant BlackRock for $22.8 billion. The deal, announced one year ago, was hailed by Trump but greatly angered the Chinese government, which launched an antitrust probe into the agreement. In July, CK Hutchison said it was in talks to bring in a major Chinese investment partner—later identified as COSCO—in a bid to appease Beijing, but the proposal has remained in limbo ever since. Ziemer, who is with the Americas Program at CSIS, warned in a February report that CK Hutchison’s exit could open the door to COSCO’s stake in ports in Mexico and the Bahamas, increasing security risks for the United States.