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Impact of US-China Trade War on Panama Canal


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US-China trade war hits Canal and the world - Cortizo


S President Trump and China President Xi in happier times

Posted 21/05/2019

Panama’s president-elect  Laurentino "Nito" Cortizo, said affirmed on Tuesday, May 21  that the USA-China trade war  "not only affects the interoceanic Canal but" the world. "

Cortizo  warned that The US  and China  commercial  war "affects the world, you are talking about two great elephants", so it is "expected that both countries understand the great effect that not only has in Panama but in the world."

Cortizo and his elected vice president, José Gabriel Carrizo, spoke with journalists after the official ceremony in which the Electoral Tribunal (TE) handed them the credential that accredits them for the 2019-2024 period.

Cortizo, 66, won the elections on May 5 with 33% of the vote and will take office on July 1 to replace the ruling president  Juan Carlos Varela.



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US trade war moves China down Canal user ladder


Posted 13/06/2019

After remaining in second place for many years, the trade war with the United States has moved China down to third place behind  Japan.

The biggest user of the Canal continues to be the United States, with more than 60% of the cargo transiting the interoceanic route.

With the tensions between China and the United States, liquefied natural gas that went to the Chinese market stopped flowing through the Panama Canal, reducing the cargo tonnage of the Asian country that transits  the waterway.

"More than two million tons of gas going to China have disappeared," said Canal Administrator Jorge Luis Quijano.



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Trump-China Trade Tensions Hit Panama Canal Revenues



Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here.

The trade tension between the U.S. and China is making waves at the Panama Canal.

Cargo from the U.S. to China going through the key waterway has slumped this year as the Asian giant cuts its imports of American food and fuel, according to Panama Canal Authority CEO Jorge Luis Quijano.

Amid the dispute, Japan has displaced China as the canal’s second-largest user, while U.S. businesses remain the canal’s biggest customers, he said.

U.S. President Donald Trump complained this week that China hasn’t increased its purchases of American farm products, a promise he said he secured last month at a meeting with President Xi Jinping. China is relying more on countries such as Qatar, and Trinidad and Tobago, for gas, and Brazil for soy, according to Quijano.

“This is a bigger disadvantage to the U.S., because China just buys the same products elsewhere,” Quijano said.

The canal forecasts revenue of $3.2 billion this fiscal year, up 2% from 2018. That would have been higher without the trade dispute, which cut traffic from the U.S. to China by about 8 million tons since the current fiscal year started in October, according to Quijano. Traffic through the canal on the most important route, from the East Coast of the U.S. to Asia, was 78 million tons in the 2018 fiscal year.

Despite this, Moody’s Investors Service this year upgraded the canal’s credit rating to A1, from A2, citing its strong financial performance since the expansion, and low debt levels.

Draft Restriction

Quijano said the U.S-China dispute could cost the canal more money if tensions continue. At the same time, it may get a boost from new LNG terminals scheduled to come online in the coming months in the U.S. states of Georgia and Texas which will help supply growing demand from Japan and South Korea, he said.


Low water levels caused by a drought this year forced the canal authority to restrict the size of vessels allowed to cross the new set of locks. A draft restriction of 44 feet that mainly affects container ships will likely remain in effect for the coming weeks until rainfall picks up, Quijano said.

The canal has studied the possibility of building an additional set of locks for even bigger ships, but demand isn’t likely to merit such an undertaking in the next 10-15 years, he said.



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