PUSHBACK IN PANAMA / GEOPOLITICAL FUTURES

Pushback in Panama

The limits to which countries accept U.S. pressure isn’t in Washington’s control.

By: Allison Fedirka

Washington’s strategy to advance U.S. interests in Latin America is inherently vulnerable. 

Broadly speaking, it uses national security and economic arguments to justify its actions and prefers to work out its differences at the bilateral level. 

Threats of coercion are baked into the equation. 

But bilateral talks have graver domestic political implications for Latin American countries than they do for the U.S. 

This puts additional constraints on how the country can respond. 

Though the U.S. strategic intention is to create leverage in Washington’s favor, its efforts can backfire if it pushes a country past its limits.

To be sure, national interest is immutable, even amid the volatility induced by the Trump administration. 

What changes are the strategy and tactics used to pursue the national interest. 

Thus is the proper context through which to read Latin America. 

New security and economic agendas in Washington have prompted many countries in Latin America to reconsider their engagement strategies with the United States. 

The degree to which a country can meet Washington’s demands will be weighed against its national interests and domestic constraints. 

If the demands are too steep or threaten national interests, then the country will not comply. 

The failure to comply challenges Washington’s assumption that partners desire U.S. money and market access at almost any cost. 

Panama, a crucial U.S. ally, is putting this theory to the test.

Though U.S. security interests in Panama date back to the turn of the 20th century, the Trump administration has greatly intensified its engagement with Panama over concerns about Chinese influence in the Panamanian economy. 

Economically, Panama facilitates bicoastal commerce in the U.S. and trade to Asia. 

Its location also makes it critical to Caribbean security. 

China has been steadily building its economic influence in Panama, as evidenced by Panama's 2017 decision to no longer recognize Taiwan, the growing presence of Chinese banks like the Industrial and Commercial Bank of China, and the increased role of Chinese companies in port and logistics projects. 

Washington is especially concerned with the potential impact Chinese influence in port and logistics projects could have on security and transit in the Panama Canal.

Initially, the government of Panamanian President Jose Raul Mulino opted to engage amicably with the second Trump administration and demonstrated a willingness to address Washington’s concerns. 

But even before Trump took office, Panama said it would use a U.S. company to update the feasibility studies of the Panama-David train project, originally developed by the Chinese government. 

In early 2025, the Panamanian government took steps to help secure favor with Washington, announcing plans to audit ports, withdrawing from China’s Belt and Road Initiative and accepting hundreds of third-country nationals deported by the U.S.

By spring, however, social and political unrest made Panama’s U.S. strategy untenable. 

Mulino assumed office just over a year ago with the expectation that he would improve the country’s economy. 

However, various workers' groups soon began to voice their discontent over living standards and proposed government reforms, such as those related to social security funding. 

What began as small protests among select unions soon inspired similar actions by teachers, doctors, students, indigenous groups and banana farmers.

What made the unrest particularly problematic is that it occurred against the backdrop of aggressive U.S. rhetoric over Washington’s desire to retake control of the canal, agreements for cooperation with the U.S. military on Panamanian soil and the passage of U.S. warships through the canal. 

Anti-government sentiment adopted anti-U.S. undertones, and the public and political opposition began to question Mulino’s motives and challenge his accommodation strategy with Washington. 

Opposition parties have accused him of compromising the country’s sovereignty, and his disapproval rating stood at 68 percent in April. 

The Mulino government has been on the defensive for months, and it is now increasingly vocal about standing up for itself. 

Panama is also facing a generational transition that reinforces the government’s domestic constraints. 

The first generation to grow up with Panama fully controlling the canal are now adults. 

Many of them also have memories of the 1989 U.S. invasion of Panama and the arrest of Manuel Noriega. 

This generation (and subsequent ones) have fundamentally different views of Panama and its relationship with the United States. 

They expect more reciprocity, hold their country and its neutrality in higher esteem, and are more open to partnerships with other countries.

What’s happening in Panama is a cautionary tale about the risks the U.S. faces in pushing countries too far. 

The potential for a strategic miscalculation is acute in countries whose governments are already facing divisive domestic challenges. 

Such is the case in Colombia. 

Earlier this year, Bogota, threatened with 25 percent tariffs, acceded to Washington’s demand to accept deported migrants. 

But the country is no longer as well positioned to absorb more people. 

The government of President Gustavo Petro faces mounting political and social opposition to various reforms as it struggles to revitalize the economy and manage criminal groups in the country. 

Chile may also find itself in a compromising position, especially if the U.S. makes good on its threat of 50 percent tariffs on copper. 

The presidential elections in November, then, may serve as a referendum on the public’s attitude toward U.S. policy.

Some argue that Trump’s rhetoric on national security and tariffs is tactical. 

Indeed, many tariffs have ultimately been delayed, suspended, reduced or settled via negotiation. 

Yet there’s no denying that Trump’s behavior creates uncertainty, and it’s a matter of fact that it has bred anti-U.S. sentiment. 

Foreign consumers in Canada, Mexico and Europe have notably reduced purchases of U.S. goods. Goldman Sachs estimates this kind of consumer behavior could cost the U.S. $90 billion in 2025 alone. 

Moreover, a survey compiled by Morning Consult shows many countries view the U.S. less favorably after the first quarter of 2025 than before it. 

More than a matter of public pride, this aversion to U.S. behavior creates opportunities for other countries to enhance their own influence. 

France and Germany have led EU efforts to secure mineral resources from Latin America, particularly Argentina. 

Japan, South Korea and India have also started to improve financial and commercial ties. 

Meanwhile, countries throughout the region are taking action to fortify themselves against extended uncertainty. 

Mexico, for example, is doubling down on Plan Mexico, an ambitious development program to reduce poverty and inequality, while Brazil has passed legislation for the speedy application of reciprocal tariffs.

As Washington continues to link other strategic issues with its tariff strategy in Latin America, it will need to understand the limits each country faces. 

So far, the U.S. has shown a degree of restraint based on U.S. domestic needs and market reactions. 

Unsuccessfully navigating how much pressure Washington puts on a country’s internal systems risks provoking an unintended socio-political reaction, the repercussions of which are out of Washington’s control.