US and Panama sign defense pact to strengthen control over Panama Canal amid rising China threat

The United States and Panama have formalized a new defense and security pact designed to enhance control over the Panama Canal , which US Defense Secretary Pete Hegseth asserts is vital in countering China’s expanding influence in the region.

The Panama Canal Authority confirmed in a statement late Wednesday that a joint declaration was signed by Panama’s Minister for Canal Affairs and Hegseth. This agreement reaffirms Panama’s sovereignty over the canal and establishes a new framework for military cooperation between the two nations.

“The declaration reaffirms respect for, and the recognition of, Panamanian sovereignty over the interoceanic waterway,” the Canal Authority’s statement read. It also reinforces both nations’ commitment to the Neutrality Treaty and the laws that govern canal operations, including Panama’s Constitution, the treaty itself, and the Canal’s Organic Law.

Beyond the symbolic reaffirmation, the pact introduces a cost-sharing model to cover services provided to US warships and auxiliary vessels, aiming for a "cost-neutral" arrangement. “Efforts will be made [to] develop a mechanism which will allow compensation for services provided to warships and auxiliary vessels, seeking a cost-neutral basis,” the statement explained. This model will be evaluated jointly with Panama’s Ministry of Security.

Hegseth further revealed that a broader framework is in the works to ensure US warships have “first and free” passage through the Panama Canal. He announced that a memorandum of understanding had already been signed and that a final document would soon be in place to guarantee toll-free priority for American naval vessels.

The Canal Authority underscored that this agreement is just the beginning, with plans for further development in subsequent stages. “The declaration constitutes a first step in establishing this model, which will be developed in later stages,” it noted.

As the US strengthens its military coordination with Panama, the Canal Authority highlighted existing collaborations in engineering, security, and cybersecurity—critical areas for both nations as they aim to mitigate foreign interference.

This pact coincides with the US preparing to deploy the USNS Comfort, a Navy hospital ship, to the region to reinforce its presence and commitment to partnership. Earlier this week, Hegseth met with US troops, Panamanian officials, and toured the canal, reiterating the growing threat posed by China in the Western Hemisphere.

“Make no mistake, Beijing is investing and operating in this region for military advantage and unfair economic gain,” Hegseth said, adding that China’s military presence includes facilities and ground stations extending into space. “They exploit natural resources and land to fuel China's global military ambitions. China's factory fishing fleets are stealing food from our nations and from our people,” he continued.

However, Hegseth emphasized that the goal is not war but deterrence. “Together, we must prevent war by robustly and vigorously deterring China’s threats in this hemisphere,” he urged.

The US is also taking steps to address Chinese-controlled infrastructure in Panama. “China-based companies continue to control critical infrastructure in the canal area,” Hegseth pointed out. “That gives China the potential to conduct surveillance activities across Panama. This makes Panama and the United States less secure, less prosperous and less sovereign. And as President Donald Trump has pointed out, that situation is not acceptable.”

Hegseth was firm in his stance: “The United States will not allow China to threaten the canal’s operation.” He added, “To this end, the United States and Panama have done more in recent weeks to strengthen our defense and security cooperation than we have in decades.”

Despite the growing military and political coordination, Panamanian President José Raúl Mulino has denied that China controls the canal, rejecting US State Department claims of a deal guaranteeing toll-free passage for US warships. The Canal Authority also clarified that there have been “no adjustments” to the canal’s fee structure.