Trump says China controls the Panama Canal — but here’s how it really works

A quarter-century after the U.S. handed control of the Panama Canal to Panama, President Donald Trump wants to take it back.

Early this month, Trump suggested he would consider using military force to regain control of the canal from Panama, one of the U.S.'s closest allies in Latin America, describing it as “vital” for national security.

But his gripe is more with U.S. rival China, which he says is “operating” a critical waterway that serves as a transit point for almost 5% of the world's maritime trade.

“We didn’t give it to China,” Trump said Monday during his inaugural address. “We gave it to Panama, and we’re taking it back.”

Panama strongly rebuked Trump’s comments, with President José Raúl Mulino saying the canal “is and will continue to be Panama’s.”

Mulino also rejected Trump’s claim that China controls the canal.

“There is no presence of any nation in the world that interferes with our administration,” he said Monday in a statement in Spanish.

China said it agreed with the Panamanian president, saying the canal “is not under the direct or indirect control of any power.”

“China does not participate in the management or operation of the canal and has never interfered in matters related to it,” Foreign Ministry spokesperson Mao Ning said at a regular briefing in Beijing on Wednesday. “We have always respected Panama’s sovereignty over the canal and recognized it as a permanently neutral international waterway.”

The neutrality of the nearly 50-mile canal, through which nearly 15,000 ships transit each year, is enshrined in Panama’s Constitution and is enforced by the autonomous Panama Canal Authority.

“That’s what has made the Panama Canal so successful, and why it’s still one of the main commercial arteries of the world — because of this neutrality,” said Beatriz García Nice, a Latin America program associate at the Wilson Center, a nonpartisan research organization in Washington.

The United States began building the canal in 1904, the year after Panama gained independence from Colombia with U.S. support. The project was completed in 1914 as part of efforts to cut the transit time for U.S. commercial and military ships that previously had to go all the way to the tip of South America just to get from one U.S. coast to the other.

By the mid-20th century, control of the canal had become a source of tension between the U.S. and Panama, erupting into anti-American riots in 1964 that resulted in the deaths of four U.S. soldiers and more than 20 Panamanians.

On Dec. 31, 1999, the U.S. relinquished control of the canal to Panama under a treaty negotiated by President Jimmy Carter and ratified by the Senate in 1978 in what Trump has called “a terrible mistake.” The U.S. retained the permanent right to defend the canal against any threat to its neutrality.

Several international companies that now manage ports along the canal, including the Seattle-based SSA Marine, which operates a cargo terminal on the Atlantic side, won their rights in bidding processes that were described as fair and nondiscriminatory by U.S. officials at the time.

In 1997, Hutchison Ports, a private company based in the Chinese territory of Hong Kong that manages 53 ports around the world, won the rights to manage two ports — Balboa on the Pacific side and Cristóbal on the Atlantic side.

The Trump administration argues that China could use those ports to turn the Panama Canal into a “choke point” against the U.S.

“If these companies control both ends of that canal in a time of conflict, and the Chinese tell them, ‘Shut it down and don’t let the U.S. go through there,’ we’ve got a big, big problem,” Secretary of State Marco Rubio said last week during his Senate confirmation hearing, “a big economic problem and a big national security and defense problem.”

Though at opposite ends of the canal, the ports are not gateways to the waterway — ships do not have to pass through them to enter the canal. Instead, the ports mostly serve as places to handle cargo.

“It would take an act of war, effectively, for the Chinese to shut it down,” said Christopher Sabatini, a senior research fellow for Latin America at Chatham House, a London-based think tank. “You can’t ask a port company to shut down a canal.”

Trump also claimed that the U.S. has been “overcharged” for its ships to sail through the canal, saying that Panama was in “violation” of the treaty.

“American ships are being severely overcharged and not treated fairly in any way, shape or form. And that includes the United States Navy,” he said in the inaugural address.

Because the waterway, which is fed by a freshwater lake, is seeing its water levels decrease because of a warming climate, the Panama Canal Authority has limited the number of ships that can pass through daily and raised fees for all ships regardless of the country they belong to.

“The fees have been raised across the board in a professional, transparent manner, nothing less, nothing more,” Sabatini said. “It is simply like any different toll that is managed professionally and independently.”

Sabatini and Nice say the growing accusations could hurt U.S. relations with Panama, where China has been making inroads.

“What this is doing is questioning even further if the United States is a reliable partner, especially in face of the Chinese influence that is already in the region,” Nice said.

As for Trump’s threat to use military force to retake the canal, Sabatini said such a drastic action would require Senate approval.

“It’s an international treaty, it was approved by the U.S. Senate,” he said. “This is not something that the executive can unilaterally decide to revoke.”

Still, the Panama Canal Authority has launched an audit of Hutchison Ports, which Nice said was an attempt to placate Washington.

“They are trying to not confront one of your biggest allies and are saying, ‘If this is going to help and sort of bring down the temperature, then we will do it,’” she said.

Hutchison Ports said it was fully cooperating with the audit and remained committed “to excellence and ethics in each of our operations,” Bloomberg News reported, citing a statement. The company did not respond to an NBC News request for comment.

Trump also vastly overstated the number of Americans killed during construction of the canal, saying 38,000 lives were lost. About 5,600 out of 56,000 workers are believed to have died from injury or disease during the U.S. phase of construction, according to the Panama Canal Authority, most of whom were from the Caribbean.

For many Panamanians, the canal’s independence is a matter of pride.

“The Canal was not a concession from anyone. It was the result of generational struggles that culminated in 1999,” President Mulino said. “Since then until now, for 25 years, without interruption, we have managed and expanded it responsibly to serve the world and its commerce, including the United States.”

This article was originally published on NBCNews.com