Panama's top maritime officials land in Beijing on July 16 with a mandate that looks technical and is anything but. Officially, Panama Maritime Authority (AMP) administrator Luis Roquebert leads a delegation to renew a bilateral shipping treaty and discuss inspection protocols. In reality, Panama is going to beg its way out of a blockade dressed up as bureaucracy, one that has already driven over 200 vessels off its flag.

The case

Strip away the geopolitics and the underlying dispute is simple. Since 1997, Panama Ports Company, a subsidiary of Hong Kong conglomerate CK Hutchison, has run Balboa and Cristóbal, the container terminals sitting at the Pacific and Atlantic mouths of the Canal. These are not the waterway itself, which Panama has operated independently since 1999, but they are the chokepoints on either side of it: whoever runs them controls the first and last mile for a large share of the roughly 14,000 vessels transiting the canal each year.

In 2021, that concession was quietly extended for another 25 years, to 2047, without competitive bidding. In January, following an audit which found Panama had collected barely a third of what it was owed under the contract, the Supreme Court ruled the 1997 concession law and its 2021 extension unconstitutional. The court's core finding: the deal was never put out to public tender, a breach of Article 266 of the constitution, and its terms caused direct harm to the public interest. Hutchison lost both ports. It has since filed an international arbitration seeking more than $2bn in damages.

Washington's fingerprints all over

The ruling did not land in a vacuum. A year earlier, after Trump accused China of "running the Panama Canal," Hutchison struck a $22.8bn deal to sell its non-Chinese port empire, Balboa and Cristóbal included, to a consortium led by BlackRock and MSC's Terminal Investment Limited. Beijing's antitrust regulator froze the sale as capitulation to American pressure, and Hutchison spent 2025 trying to appease both capitals by inviting Chinese state-owned COSCO Shipping in as a co-investor.

The court's ruling landed in the middle of that stalemate, and the White House did not hide its satisfaction, touting it as a decisive blow against Chinese-linked control of the canal's flanks. Panama then handed interim operations to Maersk and MSC's TiL, the exact consortium that Trump's pressure had assembled a year earlier. Panama's court may have ruled on solid procedural grounds. Yet coincidentally, it also delivered Washington the outcome it had spent a year manufacturing, which makes Panama's insistence on pure judicial independence a harder sell than officials in Panama City want to admit.

China's punishment campaign is real

None of that, however, legitimises what Beijing did next. China weaponised Port State Control (PSC) the way only a dominant port authority can: quietly, deniably, devastatingly. Tokyo MOU records show detentions of Panama-flagged vessels at Chinese ports climbing from 20 in February to 92 in March, 135 in April, and a peak of 140 in May, easing only to 64 in June as diplomatic heat rose. COSCO suspended its own Balboa service in solidarity. The message needed no press release: cross a Chinese state-linked firm, and Beijing makes your flag radioactive.

It has worked. Panama's open registry, its single greatest commercial asset at 8,638 vessels and 233.2mn tonnes representing the world's largest merchant fleet, is now its greatest vulnerability, and shipowners have already voted with their re-flagging.

Beijing then overplayed its hand in public. At the Organisation of American States (OAS) General Assembly in late June, China's permanent observer Xie Feng told Panama to "correct its errors," a demand for a democracy to overrule its own top court that foreign minister Javier Martínez-Acha threw back hard by revealing Chinese officials had asked him directly, more than once, to intervene in the ruling. US ambassador Kevin Cabrera called Beijing's denial of any link between the detentions and the ruling an outright lie. 

US counterweight is self-interest wearing a rule-of-law mask

Federal Maritime Commission (FMC) Chairman Laura DiBella's July 7 statement escalated things further, warning that China's "retaliatory and unjustified" inspections could trigger a US investigation and corrective measures against Chinese-controlled carriers. The legal hook is genuine. So is the self-interest: Washington spent a year engineering Hutchison's exit and will not now watch Beijing claw the outcome back through customs paperwork. Trump's claim that "China's trying to take over the Panama Canal" conflates commercial terminal operators with sovereignty over the waterway itself, a narrative his administration has found useful since it first floated retaking the canal outright.

Peel back the sovereignty rhetoric from both capitals, and what remains is a resource fight over who controls the infrastructure bookending the world's most valuable shortcut. China is punishing Panama for a ruling Washington did much to engineer. The White House is defending a rule-of-law outcome it spent a year manufacturing for its own strategic ends. Panama, caught in the middle, dispatches a technical delegation to Beijing and hopes Roquebert can squeeze out a renewal of the treaty, prolonging a ceasefire neither superpower has much incentive to make permanent.