The Panama Canal has long been a key trade route, connecting the Atlantic and Pacific Oceans and moving trillions in cargo. But recently, it’s been facing some serious challenges. Elon Musk has even expressed concern over what’s going on with it. Once controlled by the U.S., it was handed over to Panama in 1999. Since then, rising fees and tensions, including a Trump threat, have made shipping companies unhappy. So, what’s really happening here? Let’s dive into it.

Video Transcript:

(00:03) The Panama Canal has long been a key trade route,  connecting the Atlantic and Pacific Oceans and   moving trillions in cargo. But recently,  it’s been facing some serious challenges.   Elon Musk has even expressed concern over what’s  going on with it. Once controlled by the U.S.,   it was handed over to Panama in 1999.
(00:31) Since  then, rising fees and tensions, including a Trump   threat, have made shipping companies unhappy. So,  what’s really happening here? Let’s dive into it. Donald Trump’s Desperate Threat On December 22nd, Donald Trump gave a sneak  peek of what’s in store when he steps into   the White House, and honestly, it left a lot  of people talking.
(00:50) At a rally in Arizona,   he didn’t hold back on the Panama  Canal, calling out Panama for what   he sees as crazy-high fees charged  to American ships passing through.   To say his comments shocked some  people would be an understatement. Trump’s big issue? He argued that these  skyrocketing fees are making it harder   for American businesses to ship goods  between the Atlantic and Pacific Oceans,   hurting the economy in the process. In his view,  this could be a big reason why the U.S.
(01:15) economy   hasn’t been doing as well in recent years. His  solution? If Panama doesn’t lower the costs soon,   the U.S. might just take the canal back.  Yep, you heard that right – Trump suggested   that if the situation doesn’t change,  the United States could demand control   of the Panama Canal again. He even warned  Panama officials to be “guided accordingly.
(01:36) ” Why’s this such a big deal? For  starters, the Panama Canal is   crucial for international trade. It’s one  of the busiest shipping routes in the world,   so if the fees keep climbing, it could have  massive effects on global commerce. Trump   also pointed out that countries like China  might be benefiting from these high costs,   while the U.S. is getting stuck with the bill.
(02:00)   The canal’s strategic location gives China   a chance to move goods efficiently, which could  put American businesses at a disadvantage. The president of Panama, Jose Raul Mulino, didn’t  waste any time responding. He made it clear that   Panama has full control over the canal, and he  wasn’t going to let Trump—or anyone else—tell   him otherwise. He also stressed that the canal  was never going to be handed back to the U.S.
(02:23) ,   and frankly, he wasn’t interested in  negotiating with Trump about it either. As you can imagine, this sparked  quite the back-and-forth.   But Elon Musk, the tech mogul and now a key  figure overseeing U.S. government spending,   weighed in with his take on why the prices are so  high.
(02:42) Sources close to him say that Elon believes   Panama’s price hikes are a result of several  ongoing issues they’ve been facing. Things   like a lack of fresh water, political tensions,  security concerns, and other challenges have   all piled up over time, and it’s been costly  for Panama to keep things running smoothly. Elon suggested that Panama might be overcharging  American shipping companies in an effort to make   up for these financial issues.
(03:08) In other words,  it’s less about some global conspiracy and more   about Panama’s own financial struggles. But  while Elon’s take makes sense from a business   perspective, it didn’t exactly calm the situation  down. Many people, especially Trump’s supporters,   just saw his comments as another example of  him being, well, Trump. But for others, this   was more than just a few harsh words—it felt like  a direct threat to another country’s sovereignty.
(03:31) And it wasn’t just Americans who were upset.  The response from Panama was pretty fierce.   President Mulino didn’t hold back, expressing  serious distaste for Trump’s remarks. This   reaction took many by surprise, hinting at  a deeper issue at play here. It turns out,   there’s a long, complicated history  between Panama and the U.S.
(03:51) that goes   way beyond just the past few decades.  It stretches back over 500 years,   starting with the discovery of the narrow strip  of land that would later become the Panama Canal. To really understand the weight of what’s  happening now, you have to go all the way   back to 1513.
(04:13) That’s the year when Vasco Núñez  de Balboa, a Spanish explorer, first crossed   the isthmus of Panama and realized that the land  was connecting the Atlantic and Pacific Oceans. An Explorer’s Dream Back in October of 1513, Spanish explorer  Vasco Núñez de Balboa made an incredible   discovery while crossing the Isthmus of Panama.  He found a narrow strip of land that separated   the Atlantic and Pacific Oceans, and immediately  saw the potential for creating a passage between   the two.
(04:43) He told other explorers about his find,  imagining that with the right resources, he could   build a waterway connecting both oceans. This  idea sparked excitement among other explorers,   since it could save a ton of time for  ships traveling between Europe and Asia. Why? Well, back then, the southern tip of  South America was a nightmare to navigate.   The seas were rough, and any ships that  attempted the journey rarely made it back.
(05:02) Those that did return shared horror stories  about violent storms, treacherous waters,   and encounters with what they believed were sea  monsters. Yeah, it was a pretty brutal journey. So, it made perfect sense to explore the idea of a  shortcut. Many explorers jumped on board with the   concept, but even though the idea was enticing,  real progress didn’t happen right away.
(05:24) The main   issue? The technology just wasn’t there. The  tools needed to create a canal weren’t advanced   enough to tackle the job. And on top of that,  the land they had to dig through was incredibly   tough. Thick jungles, towering mountains, and a  brutal tropical climate made things even harder.   Most of the explorers who tried to work there  weren’t used to living in such harsh conditions,   and it quickly became clear that building  the canal wouldn’t be as easy as it seemed.
(05:51) For centuries, the dream of a canal lay  dormant. It wasn’t until the late 19th   century—over 300 years after Vasco’s death—that  anyone truly tried to make it happen. In 1881,   a group of French explorers decided to take on the  challenge. By this time, technology had advanced   enough to make the task seem possible.
(06:16) The French  had recently completed the Suez Canal in Egypt,   a huge engineering success, and now they  set their sights on Panama, thinking they   could build a similar sea-level canal there.  They had the right equipment and know-how,   but they still had to contend with the same  rough terrain that had stymied earlier explorers. The Panama Canal project was taken over by a  French engineer named Ferdinand de Lesseps,   who had just pulled off a massive win with the  Suez Canal in Egypt.
(06:41) Given his success there,   everyone assumed that building a canal  in Panama would be a breeze. But as it   turned out, they couldn’t have been more wrong. Right from the start, things went  south. Almost immediately, workers   started falling ill with malaria and yellow  fever. The tropical environment was brutal,   and the diseases spread quickly.
(07:03) Within just a few  weeks, workers were dying in large numbers, and it   became clear that Ferdinand and his team hadn’t  thought through what they were getting into. The first major hurdle? The climate. Panama’s  tropical weather meant heavy rain, landslides,   and an abundance of mosquitoes. These  mosquitoes were the real troublemakers,   as they carried the deadly diseases that  wiped out so many workers.
(07:23) Unlike the dry,   manageable desert conditions of Egypt,  Panama’s dense jungle was tough to   navigate. The landscape was full of uneven  slopes and thick vegetation, making it way   more difficult to dig through than the flat  desert terrain they’d dealt with in Egypt. Then, there were the costs.
(07:43) All these  issues—disease, the rough terrain, the   equipment needed to deal with it—made everything  much more expensive than anticipated. The project   became a financial black hole. Expenses kept  rising, but progress was slow. And to make matters   worse, there was a lot of corruption among the  higher-ups, which only added to the growing mess. By 1889, barely eight years into the project,  things had completely fallen apart.
(08:07) Ferdinand   had lost over 20,000 workers to disease, and the  money spent was gone for good. The whole thing   was a disaster, and with no real progress  being made, most of the teams working on   the canal pulled out. By the end of December  1889, the project was officially abandoned. It was a huge failure by every measure. But less  than 20 years later, the U.S.
(08:29) stepped in to try   again. This time, it was led by John Stevens, a  well-known civil engineer who had a reputation   for getting things done. The question was: would  Stevens succeed where so many others had failed,   or would he just be another name in the  long list of those who tried and fell short? Building the Canal At the dawn of the 20th century, U.S.
(08:53) President  Theodore Roosevelt got seriously interested in   completing the Panama Canal. He saw huge  potential in having a shortcut between the   Atlantic and Pacific Oceans—not just for  trade, but for military strategy as well.   The canal could give the U.S. a faster  route for transporting goods and troops,   making it a powerful asset for both  commercial and military purposes.
(09:12) There was just one big problem: it wasn’t the  U.S. ‘s territory. While building the canal   was one thing, actually having control over it  was another. For Roosevelt’s vision to work,   the U.S. needed legal rights over the canal zone,   something the previous countries trying to build  it hadn’t been able to secure.
(09:30) The idea of the   U.S. owning it—or at least having some special  rights—was key to making it truly beneficial. Around the same time, Panama was in the middle  of a battle for independence from Colombia. The   U.S. saw this as an opportunity to get involved.  Panama’s fight for independence wasn’t going well,   and Roosevelt figured supporting them could be  a win-win. So
(09:53) in 1903, the U.S. backed Panama’s   independence movement, offering political and  financial support. Thanks to this backing,   Panama agreed to sign a treaty that would grant  the U.S. control over the Canal Zone, effectively   giving them the green light to build and manage  the canal in exchange for some financial aid. The treaty was signed in 1903, and just a year  later, in 1904, construction began.
(10:17) But this time,   it wasn’t the French who were in  charge—it was the United States,   and they brought in John Stevens, an American  civil engineer with a solid reputation for   getting things done. Stevens was known  for being a smart, no-nonsense manager,   and he had a knack for handling huge  projects under a lot of pressure.
(10:35) He   was exactly the kind of person needed to push  the project forward after decades of failure. John Stevens, the new man in charge of the Panama  Canal project, learned from the mistakes of the   past, especially the ones made by Ferdinand de  Lesseps and his French team. Instead of diving   straight into the physical labor of digging,  Stevens took a smarter approach.
(10:58) He focused on   taking care of his workers first, understanding  that keeping them healthy was essential to making   the project succeed. He ensured they had decent  housing, good sanitation, and most importantly,   access to medical care. Malaria and yellow  fever had decimated the French workforce,   so Stevens wasn’t taking any chances.
(11:20)   He brought in top medical professionals   from the U.S. military to manage the health  risks and keep the diseases under control. But Stevens wasn’t just focused on the workers’  wellbeing. He also realized that digging a   sea-level canal, like the French had tried to  do, would be a monumental task in such difficult   terrain.
(11:43) The land was full of steep slopes and  deep valleys, and leveling it all out would be   incredibly expensive and time-consuming.  So, Stevens and his team of engineers made   a big decision: instead of going for a sea-level  canal, they would build a lock-based system. The   idea was to lift ships up to a higher elevation  at one point of the canal, then lower them back   down at another, bypassing the need to dig through  steep hills.
(12:07) This lock system would make it easier   to work with the land’s natural features, reduce  costs, and streamline the process. It wasn’t going   to be easy, but it was definitely a more practical  solution than what had been attempted before. By 1906, they had made solid progress,   but there was still a mountain of work left to  do. However, their troubles were just beginning.
(12:28) Tensions between Stevens and the U.S.  government began to escalate, especially   with President Theodore Roosevelt. At first,  the administration had been fully supportive,   providing the resources and backing the project  needed to get started. But by the end of the year,   it seemed like the government’s support  was turning into interference.
(12:49) Some   reports suggest that Roosevelt was pressuring  Stevens to hire a contractor he didn’t trust,   while others claim the president wasn’t  on board with some of Stevens’ recent   decisions about how the project should  be run. Whatever the reasons, it was   clear that the relationship between Stevens  and the government was beginning to sour.
(13:08) Then came the breaking point. Stevens, already  dealing with the immense pressure of the project   and the constant strain of working in such harsh  conditions, fell ill from stress. It was the   perfect excuse for the U.S. government to replace  him. But before they could formally push him out,   Stevens beat them to the punch.
(13:31) In 1907,  he publicly resigned, stepping down as   chief engineer and handing over the reins  to a man named George Washington Goethals. Progress Under Goethals When George Washington Goethals took over  the Panama Canal project, many expected him   to bring some fresh ideas and lead the charge  in a totally new direction. But in reality,   he mostly just picked up where John Stevens  left off.
(13:55) Goethals and his team used the   same methods Stevens had put in place,  including steam shovels and dynamite,   to excavate the infamous Culebra Cut, one of the  toughest sections of the canal. It wasn’t an easy   task by any means. The land was treacherous,  and new excavation methods were necessary to   make any real progress.
(14:16) But even with all  the latest technology, they still faced   constant setbacks with equipment failures and  the sheer difficulty of moving that much earth. Despite all the measures Stevens and Goethals took  to prevent disease—such as bringing in top-notch   medical teams to fight yellow fever—things  weren’t looking great on the health front.   Nearly 5,000 workers died from yellow fever and  malaria during the project.
(14:38) The work was grueling,   and conditions were far from ideal. On  top of the disease, landslides and bad   weather constantly set them back. Workers would  spend weeks carving out a section of the canal,   only for a minor rainfall to fill it up with mud,  undoing all their progress. It was demoralizing,   but Goethals and his crew didn’t back  down.
(15:00) They kept pushing forward, determined   to make that 500-year-old dream of a canal  connecting the Atlantic and Pacific a reality. Finally, after a decade of struggles,  setbacks, and unimaginable challenges,   the Panama Canal was completed. On August  15, 1914, the SS Ancon, a U.S. cargo ship,   became the first vessel to officially pass through  the canal.
(15:27) This moment was a huge deal—not just   for the U.S. but also for Panama. The canal was  going to change everything. Before the canal,   moving between the Atlantic and  Pacific took about two months—an   absolute nightmare for trade and military  operations. But with the canal now in place,   it only took about eight hours to travel between  the two oceans.
(15:51) That was a massive difference,   and it gave the U.S. a huge advantage  in both commerce and military strategy. What made this even more impressive was the  diversity of the workforce. Workers came from   all over the world, including experienced laborers  from the Caribbean, all of them coming together   to make the canal happen. It wasn’t just an  American achievement—it was a global effort.
(16:14) From the moment the Panama Canal opened, it  was under U.S. control. The U.S. didn’t just   have authority over the canal itself; they  owned the entire area surrounding it, which   gave them a major strategic advantage. President  Theodore Roosevelt had seen the canal as a vital   piece of military infrastructure, especially  as global tensions started to rise and World   War I loomed on the horizon. The U.S.
(16:42) military  was quick to recognize the canal’s importance,   and they used it as a vital shipping route  to transport supplies for the war effort. Even after the war ended, the U.S. held  onto control of the canal zone. The canal   was vital not just for military purposes but  for trade as well. Over the years, the U.S.   continued to invest in its infrastructure, making  improvements to accommodate even larger ships,   including the massive Seawise Giant, which  never actually passed through.
(17:10) Despite that,   countries from all over the  world were keen to use the canal,   as it made shipping between the Atlantic  and Pacific much faster and more efficient. Because of the canal’s strategic location and  high traffic, Panama benefited significantly   from the U.S. presence.
(17:29) They were receiving  generous compensation from the United States   for allowing them to control the area. For  decades, the U.S. held sovereignty over the   canal and its surrounding region.  But things were about to change. In the nineteen sixties and nineteen seventies,  Panama began to push back against U.S. control,   and everything changed when Omar Torrijos  became the president.
(17:50) Omar wasn’t your typical   politician. He loved his country deeply, and  he was ready to fight for Panama’s sovereignty,   no matter what it took. He believed Panama  should have full control over its land,   and that meant ending the Hay Bunau  Varilla Treaty, which had granted the   U.S. ownership of the canal zone in  exchange for financial compensation.
(18:10) Omar Torrijos wasn’t about to let Panama  remain under the shadow of U.S. control   forever. He and his people were determined  to gain complete sovereignty over every inch   of their land—including the Panama Canal, a  massive symbol of American influence. Torrijos   knew that the canal was vital to Panama’s  future, both economically and politically,   and he wasn’t going to settle for  anything less than full control.
(18:37) Starting in the late sixties and into the  early seventies, Omar Torrijos began some   pretty intense negotiations with the U.S.  President Richard Nixon. To say the talks   were tense would be an understatement.  Both sides had strong feelings about the   canal and its strategic importance,  but after years of back-and-forth,   they finally reached an agreement in 1977.
(19:01) This  was when the Tjô Carter Treaties were signed,   which granted Panama more legal rights over  the canal. The U.S. still had a significant   presence and influence, but it was a  step in the right direction for Panama. Over the next two decades, Panama’s control  over the canal continued to grow. They gained   more and more rights, with the ultimate  goal of full ownership.
(19:22) Every year,   Panama’s position became stronger, and the  U.S. presence slowly diminished. Finally,   on December 31, 1999, Panama officially gained  full control and ownership of the canal, marking   the end of an era. The canal was now Panama’s to  manage, and it was a massive win for the country. But even though the handover was a huge  milestone, tensions were far from over.
(19:46) Overcharging the US Once Panama gained full control of the canal  in 1999, they didn’t waste any time making   some major changes. The first thing they did was  raise the fees that shipping companies had to pay   to use the canal. And this wasn’t just a small  bump—it was a big one.
(20:06) The tolls almost doubled,   which definitely made waves in the shipping  industry, especially among American companies   like Maersk Line and Cosco Shipping.  These companies weren’t just any players;   they were huge contributors to the U.S.  economy, moving tons of cargo between oceans. The Panamanian government argued that the  hike was necessary to fund maintenance and   improvements to the canal.
(20:31) They pointed out that  the infrastructure needed to be upgraded to handle   bigger ships in the future, which would,  in turn, benefit everyone. But of course,   the shipping companies weren’t thrilled about  this. They grumbled about the higher fees,   but at the end of the day, they  had no choice but to pay up. Over time, the shipping companies got  used to the higher fees—though they   definitely didn’t like it. But the story  didn’t end there.
(20:55) As the years went on,   the tolls kept rising. By the mid-two thousand  and tens, the situation was getting out of hand.   The shipping companies were not happy, and  some even started holding private meetings   with the Panama Canal Authority to figure out  ways to make the tolls more affordable. It   was clear that something needed to change, but  the Panamanian government wasn’t backing down.
(21:17) Then came 2016, when the Panama Canal  Authority hit everyone with another   massive price increase. This time, it was  too much for many companies to swallow,   and the backlash was even louder. U.S.  shipping companies were especially vocal,   criticizing the increases and calling for  some kind of solution.
(21:40) The tolls were climbing   faster than anyone had expected,  and with no signs of slowing down,   it felt like the canal’s growing costs were  becoming a serious issue for American businesses. So, when the Panama Canal Authority was asked  why they kept raising the tolls, their answer   was pretty straightforward: they needed the extra  cash to fund the ongoing expansion project.
(22:01) They’d   promised that the canal would be upgraded, and  by the end of 2016, the project was finally   completed. The canal was bigger, better, and ready  to handle even more traffic, especially with the   new set of locks designed for larger ships.  But, as expected, the tolls didn’t go back   to what they were before the project started.  In fact, the price hikes just kept on coming.
(22:25) By early 2020, the toll increases weren’t slowing  down. In 2023, for instance, any ship under 65   feet had to pay over 10 percent more just to  pass through. And it didn’t stop there—by 2025,   the fees were expected to jump by almost 30  percent. Shipping companies had no choice but   to accept the new rates, though they weren’t happy  about it.
(22:52) A lot of people started to realize that   under U.S. control, tolls had mostly stayed the  same for nearly four decades. It wasn’t until   Panama took full control that prices started  to climb, particularly after the seventies. This shift in pricing didn’t sit well with many,  and it eventually led to some pretty heated   discussions, one of the biggest moments being  when Donald Trump decided to speak out about it.
(23:16) Trump vs Panama When Donald Trump spoke out about Panama,   he didn’t hold back. He accused the  Panamanian government of overcharging   shipping companies using the canal and went  as far as threatening to take control of the   waterway if they didn’t stop.
(23:34) He even suggested  that Panama was playing favorites with China,   implying that the Chinese government might be  influencing Panama’s decisions regarding the   canal. It wasn’t just about the tolls anymore—it  seemed like Trump was getting at something bigger. The Panamanian government wasn’t too pleased  with Trump’s comments. President José Raúl   Mulino came out swinging, defending Panama’s  sovereignty over the canal.
(23:57) He made it clear   that Panama had full control, and there  was absolutely no outside influence,   especially not from China. As far as Mulino  was concerned, the matter was settled,   and there were no plans to renegotiate  with the U.S. about the canal. The country   wasn’t about to give up its rights to the  waterway or let anyone push them around.
(24:16) Mulino didn’t just stop there. He also  addressed Trump’s complaints about the   rising toll fees. He explained that  the price increases weren’t arbitrary;   they were carefully calculated by experts who took  into account the cost of operations, maintenance,   and market conditions.
(24:37) The fees were necessary to  keep the canal running smoothly, ensuring that it   would continue to be a sustainable resource  for both Panama and the shipping companies. It was pretty predictable that Elon Musk would  have something to say about all this drama with   the Panama Canal. As the head of the Department  of Government Efficiency, it’s his job to dig into   issues like these and make sure everything  is running as smoothly and efficiently as   possible. So, after taking a deep dive into the  situation from both sides, Elon didn’t hold back.
(25:04) According to him, things have been a bit of a mess  for the Panama Canal in recent years. Compared to   how things were back in the sixties, the canal’s  been dealing with some serious environmental   issues, like water shortages and droughts. This  has made it harder for big ships to get through,   and things only got worse in 2019.
(25:26) That’s when  the dry season lasted much longer than expected,   with almost no rain. With the climate looking  like it’s only going to get more unpredictable,   the Panama Canal Authority had to find new ways  to keep things running. But these adjustments,   while necessary, made everything  slower, which in turn made the canal   harder and more expensive to maintain.
(25:47)   The longer ships took to pass through,   the more stress it put on the locks, which  were already starting to wear out faster. But it wasn’t just the weather causing  problems. The pandemic in 2020 threw a   huge wrench into things too. With countries  closing borders and factories shutting down,   goods were stuck in limbo, meaning way less  revenue was flowing into the canal.
(26:09) Even now,   the canal is still feeling the effects of that  slowdown. To make up for the lost revenue,   they’ve had to increase tolls, and it looks like  they’ll keep going up for the foreseeable future. The problem with this, Elon pointed out, is  that the canal’s infrastructure is getting   old. Over half of it is more than 100 years  old.
(26:29) Sure, they’ve made some upgrades and   expansions since 2016, but they’re just  putting a Band-Aid on the bigger issues.   The canal is still running on infrastructure  that wasn’t built to handle modern traffic,   and the situation isn’t getting any  better. To really future-proof the canal,   they’d need some serious upgrades,  but that would cost a fortune.
(26:48) And if they decide to fund those upgrades by  jacking up tolls even more, shipping companies   are going to bail. Already, the price hikes have  been getting complaints from companies, including   American giants like Maersk Line and Costco  Shipping. Elon’s worried that if the canal keeps   raising fees, fewer and fewer companies will be  willing to pay.
(27:09) And even if they had the money to   fix everything, the process would take years—just  like it did when the canal was originally built.   It took about a decade back then, and even with  today’s technology, it’d still take a long time. What do you think? Leave your thoughts in the  comments below, and if you liked this video,   don’t forget to subscribe to our  channel. See you in the next one!