Panama has strongly rejected US claims about securing free passage for government vessels through the Panama Canal, whilst announcing its withdrawal from China's Belt and Road Initiative amidst growing US pressure over alleged Chinese influence in the region.

Panamanian President Jose Raul Mulino on February 6 called the US State Department's assertions "intolerable" and rejected "bilateral relations based on lies and falsehoods," after the Department claimed in an X post that US vessels could transit the vital waterway without charge.

The Panama Canal Authority, which manages the key waterway, said it "has not made any adjustments" to its tariffs but remained open to dialogue. According to records cited by El Pais, the US Navy paid less than $2mn annually in tolls between 2015 and 2024, representing a fraction of US military spending which exceeds $800mn.

Reacting to Mulino's statement, US Secretary of State Marco Rubio, speaking in Santo Domingo, clarified he had "no confusion about Panama" and respected that the country "has its processes and laws it has to follow." However, he maintained it was "absurd" for naval vessels to pay "to transit a zone we are obligated to protect in time of conflict."

Since winning the November election, Trump has refused to rule out using force to seize the canal, through which 40% of US container traffic passes. The US-built waterway, handed over to Panama in 1999, handles about 5% of global maritime trade.

Washington has long expressed concerns about Chinese influence over the canal. "Chinese companies are building a bridge across the canal – at a slow pace so as to take nearly a decade – and control container ports at either end," Senate Commerce Committee chair Ted Cruz said at a hearing last month where a bipartisan group of senators raised the issue.

While Chinese state-owned firms are not directly operating the canal, Hong Kong-based CK Hutchison Holdings – a privately-owned conglomerate – does manage two ports at the waterway's entrances through a subsidiary, raising some security concerns among experts as the formerly British-controlled territory finds itself increasingly under Beijing’s influence. China is the second-largest user of the canal after the United States.

Following Trump's takeover threats, first floated at a rally in December, Mulino ordered an audit of Hutchison Holdings, which could result in the early termination of its port licence.

The Panamanian president on February 6 also confirmed the country had pulled out of China's Belt and Road Initiative infrastructure programme, which it joined in 2017. This makes Panama the first Latin American nation to exit President Xi Jinping's trillion-dollar programme.

In response, China's Foreign Affairs spokesman Lin Jian argued the partnership was yielding "fruitful results" and urged Panama to "resist external interferences."

"We respect the government of Panama's management and operation of the Canal. Never ever has China interfered," Foreign Ministry spokesperson Guo Jiakun said, rebuffing US accusations of meddling in the waterways' operation.

Following Rubio's visit to Panama earlier this week, the US Defence Department reported that Secretary Pete Hegseth and Mulino agreed to expand military cooperation. "They agreed on the strong relationship and many security interests that the United States and Panama share, including safeguarding the Panama Canal," a Pentagon spokesperson said on February 5.

Mulino and Trump are scheduled to discuss the issue in a telephone conversation on February 7. Despite the tensions, the Panamanian leader acknowledged the importance of maintaining good relations with the US, noting it remains Panama's main commercial partner and the primary user of the canal.