Just
Style examines the threat facing fashion’s shipping routes and supply chains in
2025 after US president-elect Donald Trump criticises the Panama Canal's high
fees and refuses to rule out using military force to retake its control when he
re-enters the White House.
Ahead of his second term as US president, Trump has demanded the Panama Canal reduce its “exorbitant prices” or he claims it’s at risk of being placed under US control.
Writing on his Truth Social social media
platform Trump
claimed: “Our navy and commerce have been treated in a very unfair and
injudicious way. The fees being charged by Panama are ridiculous, especially
knowing the extraordinary generosity that has been bestowed to Panama by the
US.”
“This complete rip-off of our country will immediately stop,” he added.
The president-elect also warned that the the US would “demand that the Panama Canal be returned to us, in full and without question” if the country cannot ensure the “secure, efficient and reliable operation of the channel”.
Panama’s president José Raúl Mulino has previously dismissed the president-elect’s claims telling a press conference in December: “There’s nothing to talk about. The canal is Panamanian and belongs to Panamanians. There’s no possibility of opening any kind of conversation around this reality, which has cost the country blood, sweat and tears.”
However, Trump has refused to give assurances against using military or economic coercion when pressed about his plans regarding Panama at a press conference on 7 January, according to UK publication The Guardian.
GlobalData retail analyst Neil Saunders tells Just Style: “Trump’s comments need to be taken for what they are: threats.” He asserts that “it is unlikely that Trump would actually seize control over the canal, however, he is likely to exert a lot of pressure on Panama to reduce shipping and transit costs.”
A key supply chain route
In recent years, costs and shipping times on the Panama Canal have increased, which Saunders explains Trump sees as “unfair”.
At around 80km long, the Panama Canal connects the Atlantic and Pacific oceans, providing an important highway between North Asia and the eastern coasts of the United States.
The Panama Canal is an important shipping route for the global fashion industry. According to the Panama Canal Authority (PCA), between 13,000 and 14,000 ships use the canal each year, connecting 1,920 ports across 170 countries.
“With the work of approximately 9,000 workers, the canal operates 24 hours a day, 365 days a year, offering transit service to ship from all nations without any discrimination,” the PCA says in a statement on its website.
Built in the 1990s, the US maintained control of the Panama Canal until 1977 when a series of treaties gradually handed the region back under Panama’s control, until 1999 when the country took sole control.
The Guardian states the US currently accounts for around 74% of the cargo travelling through the canal and is its largest user, followed by China, which accounts for 21% of cargo on the route.
Climate change threat
While the Panama Canal is currently operating at full capacity, in recent years it has faced challenges due to climate change.
At the start of the 2023 dry season, following the lowest rainfall on record since 1950, the PCA introduced water-saving measures, limiting the number of vessels using the route each day.
The canal uses a system of locks fed by water from Panama’s Gatun Lake to allow ships to pass. At the peak of the dry season, the number of vessels able to use the route each day was reduced to just 18 each day.
These restrictions caused delays for some vessels intending to use the route, particularly those that did not reserve a transit date, with some vessels needing to wait more than two days to travel through the canal in November 2023.
These delays increased travel times and, ultimately costs which are eventually passed on to businesses and consumers too.
Writing in US publication The New York Times, Harvard University lecturer Dennis M Hogan said: “If the goal is securing affordable access to the transit point over the long term, is it climate change, not Chinese influence, that US policymakers should worry about.”
Gherzi Textile Organisation partner Robert P Antoshak tells Just Style: “Trump’s perturbations over the Panama Canal are similar to his tariff-rattling with Canada and Mexico. The unknowns of his pronouncements carry weight, but whether he follows through on his threats is yet to be seen.
Emily Stausbøll, senior shipping analyst at freight benchmarking and market analysis platform Xeneta, agrees that the latest comments are unlikely to materialise into any concrete action: “Trump’s latest comments add to the uncertainty facing global ocean supply chains, but the likelihood of this actually being followed through is so low that we don’t expect to see any reaction from shippers or carriers — at this stage.”
However, she’s keen to share the more pressing concern of the pending threat from the next US administration: “What will be of more immediate concern for shippers is Trump’s threat of higher tariffs on US imports when he returns to the White House and further port strikes on the US East Coast and Gulf Coast.”
Increasing cost of shipping
It is also important to note that Trump’s interjections on the Panama Canal arrive at a time of increased costs for supply chains across the world — as well as a growing threat to commercial ships in some regions.
Stausbøll adds: “This is against a backdrop of ongoing conflict in the Red Sea, which is the primary cause of average spot freight rates from the Far East to US West Coast being 241% higher than they were at the start of December 2023 and 170% higher into the US East Coast.”
In November 2024, the American Apparel and Footwear Association (AAFA) contacted current US president Joe Biden urging the government to enhance its efforts to secure global shipping routes in the Red Sea against Houthi threats, which have made the Suez Canal an unsuitable route for carriers.
Last year, increased costs and route disruption both in the Suez and Panama canals caused European fashion retailers to place orders earlier and significantly increased shipping costs.
Saunders points out that “if Trump secures lower costs then it would be helpful to all shipping firms, including those shipping fashion”.
He continues: “Under various treaty agreements, the shipping rates have to be the same for all countries so lower prices would apply to ships of all nationalities.”