South Korean shipping companies are bracing for potential disruptions as U.S. President Donald Trump escalates tensions over the Panama Canal. As one of the world’s most critical maritime trade routes, any disruption could drive transit costs sharply higher.
On Feb. 10, global shipping news outlet TradeWinds reported that a close associate of Trump had walked back the U.S. State Department’s claim that Panama had agreed to waive transit fees for U.S. government vessels following strong pushback from the Panamanian government. However, the U.S. State Department continues to insist that military and other government-owned ships should be exempt from tolls—a stance the Panama Canal Authority firmly opposes.
Industry experts warn that if Washington succeeds in securing exemptions, the financial burden will likely shift to commercial vessels. If U.S. military ships are allowed to bypass transit fees, the Panama Canal Authority may raise tolls for other vessels to compensate for lost revenue. According to the Panamanian Embassy in Cuba, the U.S. has paid $25.4 million (36.7 billion won) over the past 26 years for the passage of its warships and submarines.
While alternative routes exist, they are largely impractical. The 80-kilometer Panama Canal serves as a vital link between the Atlantic and Pacific oceans, accommodating roughly 13,000 vessels annually. A typical canal transit takes between eight and ten hours, whereas bypassing it would require sailing around South America’s southern tip, adding more than 15 days to a journey. Crossing Antarctica or relying on overland transport is theoretically possible but remains costly and inefficient.
The 13,000 ships that pass through the Panama Canal each year account for approximately 5% to 6% of global trade. In 2023, the top users of the canal were the U.S. (71.8%), China (22.7%), Japan (14.5%), and South Korea (9.8%). Transit fees vary based on vessel size, cargo type, and volume, with containerships paying up to $500,000 (700 million won) per passage. Tolls can fluctuate sharply depending on demand, as seen last year when severe drought conditions forced authorities to cut daily transits from 31 to 25 ships, sending freight rates soaring. At the time, strong global trade volumes allowed shipping firms to pass increased costs on to cargo owners. However, with trade expected to slow amid Trump’s tariff war, carriers may find it more difficult to shift rising costs onto customers.
Further fueling tensions, two of the five major ports along the Panama Canal are operated by subsidiaries of Hong Kong-based CK Hutchison Holdings. Trump has pointed to this as evidence of Chinese control over the canal, heightening concerns within the shipping industry that the U.S. is using the toll dispute as part of a broader geopolitical maneuver. Analysts suggest Washington is leveraging the issue to strengthen its grip on a strategic chokepoint in its ongoing rivalry with Beijing. In January, the Center for Strategic and International Studies (CSIS) released a report underscoring the canal’s strategic significance to both the U.S. and China.
