China detains Panama-flagged vessels in retaliation for canal port contract cancellation

ALBAWABA- China has escalated maritime pressure by detaining and intensifying inspections of Panama-flagged vessels in its ports, in what is widely seen as retaliation after Panama canceled a key canal port concession linked to a Hong Kong–based firm.

The dispute centers on the Balboa and Cristóbal terminals at opposite ends of the Panama Canal, a vital artery handling roughly 5 percent of global maritime trade. In January 2026, Panama’s Supreme Court ruled unconstitutional a long-standing concession held by Panama Ports Company, a subsidiary of Hong Kong conglomerate CK Hutchison Holdings. The ruling cited irregularities, excessive tax privileges, and terms deemed contrary to national interest.

Panama annulled the contracts in February and reassigned interim operations to global shipping firms A.P. Moller-Maersk and Mediterranean Shipping Company. Authorities report that canal traffic has continued without disruption.

The decision followed sustained pressure from U.S. President Donald Trump, who has prioritized curbing Chinese influence in the Western Hemisphere. Washington has framed Beijing’s presence near the canal as a strategic risk, particularly regarding neutrality in potential conflicts.

U.S. Secretary of State Marco Rubio condemned the move, warning that “China’s decision to detain or otherwise impede Panama-flagged vessels engaged in lawful trade destabilizes supply chains, raises costs, and erodes confidence in the global trading system.” He added that the United States stands with Panama against “retaliatory actions” and would support its sovereignty.

Beijing reacted forcefully, calling the court ruling “absurd” and warning Panama of a “heavy price.” Chinese state-linked entities paused new investments, while port authorities began intensified inspections of Panama-flagged ships in early March.

Maritime data indicates a sharp spike in detentions, ranging from dozens to nearly 70 cases since March 8, far above normal levels. China’s Foreign Ministry denies retaliation, instead accusing Washington of attempting to “seize control” of the canal.

The standoff highlights deepening U.S.-China rivalry over strategic infrastructure and supply chains. Sustained disruptions could increase shipping costs, undermine confidence in flag-state systems, and ripple across global trade.