In 2017, Panama shifted its diplomatic allegiance from Taiwan to China, prompting initial US concerns over increased Chinese influence and economic activities. Despite a promising wave of Chinese investments in infrastructure and the initiation of negotiations for a free trade agreement, the US responded decisively through diplomatic efforts, including recalling ambassadors and direct warnings about China's economic practices. Over time, US coercive measures, including corruption investigations and political pressure, decreased China's foothold in Panama, revealing the vulnerability of Panama's dollarized economy to US influence.
The US's aggressive diplomatic strategies and economic pressure have been pivotal in curtailing Chinese influence in Panama and preventing further ties with Beijing.
Despite the promising influx of Chinese investment in infrastructure, US back-channel pressure quickly shifted the narrative and established a dominant US presence in Panama.
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