Janice R. Andrews
South Korean shipping firms are on high alert as U.S. President Donald Trump escalates tensions over the Panama Canal, a critical global trade route. The dispute centers on U.S. demands for toll exemptions for its military and government vessels, a move that could significantly disrupt global shipping and drive up costs for commercial operators.
The Panama Canal, a 80-kilometer waterway connecting the Atlantic and Pacific Oceans, is a lifeline for international trade, handling approximately 13,000 vessels annually—about 5-6% of global trade. South Korea, which accounts for 9.8% of canal traffic, is particularly vulnerable to any disruptions. The U.S., the canal’s largest user (71.8% of traffic), has pushed for toll waivers for its military ships, a stance strongly opposed by the Panama Canal Authority.
If the U.S. succeeds, industry experts warn that the financial burden could shift to commercial vessels, potentially leading to higher tolls. This comes at a precarious time for global trade, which is already grappling with slowing demand amid Trump’s tariff wars. Shipping companies may struggle to pass on increased costs to customers, further squeezing profit margins.
The dispute took a new turn on February 10 when a Trump associate contradicted the U.S. State Department’s claim that Panama had agreed to waive transit fees for U.S. government vessels. The Panamanian government has firmly denied such an agreement, insisting that all vessels, including U.S. military ships, must pay tolls. Over the past 26 years, the U.S. has paid $25.4 million for its warships and submarines to use the canal.
The stakes are high for South Korean shippers, who rely heavily on the canal for efficient trade routes. Alternative options, such as sailing around South America’s southern tip, would add over 15 days to voyages, significantly increasing costs and delays. Overland transport or Antarctic routes remain impractical and prohibitively expensive.
Adding to the tension, Trump has highlighted Chinese involvement in the canal’s operations, noting that two of its five major ports are operated by subsidiaries of Hong Kong-based CK Hutchison Holdings. Analysts suggest the toll dispute is part of a broader U.S. strategy to counter Chinese influence in the region. A January report by the Center for Strategic and International Studies (CSIS) emphasized the canal’s strategic importance in the U.S.-China rivalry.
As the situation unfolds, South Korean shipping companies are preparing for potential disruptions, closely monitoring developments that could reshape global trade dynamics. With the Panama Canal at the center of a geopolitical tug-of-war, the industry faces an uncertain future.
