PANAMA CITY—Secretary of State Marco Rubio arrived Sunday with an ultimatum from the White House for Panamanian President José Raúl Mulino: Either curtail China’s presence around the Panama Canal or face an unspecified U.S. response.
On his first overseas stop since taking office, Rubio toured the canal after talks at the country’s presidential palace with Mulino, who has rejected President Trump’s threats to take back the waterway as an affront to Panama’s sovereignty.
In a significant concession, Mulino afterward declared Panama wouldn’t be renewing a 2017 infrastructure funding agreement with Beijing and offered “technical-level” talks to clarify Trump’s doubts about Chinese control of the canal. He called the meeting with Rubio “positive” and said he didn’t think Trump’s threats would continue.
But even before Rubio departed the country, Trump appeared to double down on his threats to seize the canal, which the U.S. relinquished to Panama in 1999. “We’re taking it back, or something very powerful is going to happen,” he said, speaking to reporters at Joint Base Andrews outside Washington.
When it comes to the canal, “it is impossible, I can’t negotiate,” Mulino said before Rubio touched down in Panama City. “That is done. The canal belongs to Panama.”
Most of Rubio’s predecessors in recent decades have visited London or other major U.S. allies on their maiden overseas trips. The choice of Panama as his first stop reflected the extent to which Trump has scrambled American diplomatic priorities and refocused U.S. attention on the Western Hemisphere.
The trip, which will also take him to El Salvador, Guatemala, Costa Rica and the Dominican Republic, was being closely watched by Denmark, Mexico and other countries under pressure from Trump, wondering whether Rubio’s less confrontational instincts might help defuse tensions.
Behind closed doors at the presidential palace, according to U.S. and Panamanian officials, there were warm bear hugs, banter in Rubio’s fluent Spanish, and progress on steps to curb Chinese influence in the country, expand cooperation on migration and drug trafficking, and increase U.S. investment.
But the State Department account of his meeting with Mulino tempered Trump’s warnings to Panama only slightly. Rubio “made clear that this status quo is unacceptable,” spokeswoman Tammy Bruce said he told Mulino, arguing that Panama is violating the neutrality agreement. “Absent immediate changes, it would require the United States to take measures necessary to protect its rights under the treaty.”
Control of the canal was gradually given back to Panama as a result of a 1977 treaty signed by President Jimmy Carter . In his brief visit to the canal Sunday, Rubio gazed at the hazy, jungle-framed waterway, near one of the locks that lower and raise the water level so ships can transit from the Atlantic to the Pacific.
Cargo terminals in the canal run by a giant Hong Kong port operator, Hutchison Whampoa, are the crux of the problem for the Trump administration, which sees the Chinese infrastructure that has been built up around the canal in the past three decades as a national-security threat.
But Panamanian officials, and even some former U.S. military officials say the Chinese facilities don’t represent a military threat, breach the canal’s neutrality or even show that Panama is coming under Beijing’s influence.
Trump’s threats of potential U.S. seizure of the canal have stoked nationalistic outbursts in a country that venerates the Panamanians killed by American forces in 1964 riots over the U.S. control of the canal zone. It also revived the memories of the U.S. invasion in December 1989, in which more than 500 Panamanians and 23 U.S. soldiers were killed.
As Rubio’s motorcade wound through Panama City, some streets were festooned with Panamanian flags and banners that read “El Canal Es Nuestro”—“The Canal is Ours.” A crowd of 200 people marched in the capital, chanting “Marco Rubio out of Panama!” The front page photo of the country’s La Estrella de Panama newspaper showed Trump and Rubio’s images on an American flag being burned in the street as Panamanian police clashed with protesters and fired tear gas.
Some Panamanian officials worried a parade celebrating Chinese Lunar New Year, which was scheduled the same day Rubio arrived, might send the wrong message.
Trump claimed in December that China “is operating the Panama Canal” and has stationed troops there. He has accused Panama of charging the U.S. and its companies “ridiculous” and “highly unfair” fees to traverse the canal, which the authority denies. Mulino, a lawyer and former minister of public security, has dismissed the claims as “nonsense.”
In another move to placate Washington, the Panama Canal Authority announced last month it had launched an audit of the China-linked company that controls two of the ports. Panama also signed a $2.5 million contract with Washington lobbying firm BGR Government Affairs, which employs Trump ally David Urban, seeking to establish a more direct line to Trump’s inner circle.
Write to Vera Bergengruen at vera.bergengruen@wsj.com
