The geopolitical contest between the United States and China has once again taken center stage, this time in Panama. US Secretary of State Marco Rubio, during his first overseas trip as Washington’s top diplomat, delivered a stark ultimatum to Panama: curb Chinese influence over the Panama Canal or face the consequences. The warning, which echoes President Donald Trump’s escalating rhetoric, has set the stage for a significant diplomatic confrontation in the region.

During his visit to Panama City on Sunday, Rubio met with Panamanian President Jose Raul Mulino and Foreign Minister Javier Martinez-Acha. According to the US State Department’s summary of the meeting, Rubio conveyed President Trump’s growing concerns over Panama’s perceived violations of the 1977 Panama Canal Neutrality Treaty, which guarantees that the canal remains permanently neutral and open to all vessels.

“This status quo is unacceptable, and absent immediate changes, it would require the United States to take measures necessary to protect its rights under the Treaty,” Rubio warned. His words were a clear indication that Washington views Panama’s increasing economic ties with China as a direct challenge to US strategic interests in the region.

Panamanian President Mulino downplayed the gravity of the ultimatum, insisting that the talks with Rubio were “respectful” and “positive.” He dismissed any immediate threat of US retaliation, including the possibility of military intervention, despite Trump’s repeated assertions that the US may take drastic action if its demands are not met.

“I don’t feel that there is any real threat at this time against the treaty, its validity, or, much less, the use of military force to seize the canal,” Mulino told reporters after the meeting. He did, however, announce a key concession: Panama will not seek to renew its 2017 agreements with China under Beijing’s Belt and Road Initiative (BRI) and may even terminate the existing deal prematurely.

This announcement marks a significant shift in Panama’s foreign policy. Since signing onto the BRI, Panama has seen an influx of Chinese investment, particularly in infrastructure and port operations, which Washington has viewed with increasing alarm.

President Trump’s stance on the Panama Canal has grown more aggressive in recent months. On February 2, he delivered a cryptic warning, stating that “something very powerful is going to happen” if Panama does not heed US demands. While he ruled out the immediate deployment of US troops, he emphasized that Panama’s actions posed a major national security risk for the region.

“What Panama has done is terrible for national security in this part of the world,” Trump declared, reinforcing concerns among US policymakers that China’s expanding footprint in Latin America threatens Washington’s influence in its own geopolitical backyard.

The heart of the dispute lies in China’s growing economic presence in Panama. US officials argue that Chinese involvement in infrastructure projects, port operations, and even canal management could undermine the canal’s neutrality. Washington has particularly expressed concern over Hong Kong-based CK Hutchison Holdings, which operates ports at both entrances of the canal. Given China’s strict corporate governance laws that often compel businesses to cooperate with state authorities, many in Washington view CK Hutchison as a de facto extension of Beijing’s strategic ambitions.

Another flashpoint is the $1.3 billion bridge currently under construction by a Chinese consortium led by China Communications Construction Company and China Harbour Engineering Company. US officials see the project as a potential Trojan horse for greater Chinese influence, with some speculating that it could serve military or intelligence purposes in the future.

The legal foundation for US concerns rests on the 1977 Panama Canal Neutrality Treaty, signed between the US and Panama during the Carter administration. The treaty guarantees that the canal remains open to all nations and grants the US the right to defend the waterway if its operations are threatened.

For decades, this agreement has been a cornerstone of US-Panama relations. However, Washington now argues that China’s deepening presence violates the spirit, if not the letter, of the treaty. Some US lawmakers have even suggested that the treaty gives the US grounds to reassert control over the canal should Panama’s policies compromise its neutrality.

Panama, on the other hand, insists that its dealings with China fall within its sovereign rights and do not infringe upon the treaty’s provisions. Mulino’s government has emphasized that all foreign investments, including those from China, must comply with Panamanian laws and regulations.

The Trump administration’s hardline stance on Panama is part of a broader strategy to counter China’s influence in Latin America. In recent years, Beijing has expanded its footprint across the region through trade, infrastructure projects, and diplomatic engagement. The US has responded by pressuring regional governments to sever or at least reduce their ties with China.

Panama now finds itself caught in the crossfire of this great power rivalry. While the Mulino administration appears to be taking steps to appease Washington, it must also consider the economic benefits of Chinese investments, which have contributed to the country’s infrastructure development and job creation.

For now, the immediate question is whether Panama will take further steps to reduce China’s presence, or whether Trump’s threats will escalate into more concrete actions. Some analysts speculate that Washington could impose economic sanctions on Panamanian entities involved in Chinese projects, restrict US investments in Panama, or even take direct action to reassert control over strategic assets.

The ultimatum delivered by Rubio on behalf of Trump marks a significant turning point in US-Panama relations. As Washington intensifies its efforts to curb Chinese influence in the region, Panama must navigate a delicate balancing act between two global powers. While Mulino’s government has made an initial concession by distancing itself from the Belt and Road Initiative, it remains to be seen whether this will be enough to satisfy Washington-or whether further pressure will follow.

What is clear is that the battle over the Panama Canal is far from over. As the US and China continue their struggle for dominance in Latin America, Panama will likely remain a critical flashpoint in the broader contest for global influence.

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