The agreement, signed by top security officials from both countries, allows US military personnel to deploy to Panama-controlled facilities for training, exercises and "other activities."
The deal stops short of allowing the United States to build its own permanent bases on the isthmus, a move that would be deeply unpopular with Panamanians and legally fraught.
But it gives the United States broad sway to deploy an unspecified number of personnel to bases, some of which Washington built when it occupied the canal zone decades ago.
Trump, since returning to power in January, has repeatedly claimed that China has too much influence over the canal, which handles about 40 percent of US container traffic and five percent of world trade.
His administration has vowed to "take back" control of the strategic waterway that the United States funded, built and controlled until 1999.
The United States has long participated in military exercises in Panama.
However, a longer-term rotational force -- such as the one the United States maintains in Darwin, Australia -- could prove politically toxic for Panama's center-right leader Jose Raul Mulino.
- 'Country on fire' -
Mulino was on Thursday in Peru, where he revealed that the United States had asked to have its own bases.
Mulino said he had told visiting Pentagon chief Pete Hegseth that US bases, allowed under an earlier draft, would be "unacceptable."
He warned Hegseth: "Do you want to create a mess, what we've put in place here would set the country on fire."
In the watered-down "Memorandum of Understanding", signed by Hegseth and Panama's security chief Frank Abrego Wednesday, Panama won its own concessions.
The United States recognized Panama's sovereignty -- not a given following Trump's refusal to rule out an invasion -- and Panama will retain control over any installations.
Panama will also have to agree to any deployments.
But given Trump's willingness to rip up or rewrite trade deals, treaties and agreements, that might offer little comfort to worried Panamanians.
"What we have here is a setback to national sovereignty," Panamanian trade union leader Saul Mendez told AFP.
"What the Panamanian government has done is an act of treason. They are traitors and must be tried."
- Difficult history -
The country has a long and difficult relationship with the United States.
They have close cultural and economic ties, despite the decades-long US occupation of the canal zone and US invasion 35 years ago to overthrow dictator Manuel Noriega.
That invasion killed more than 500 Panamanians and razed parts of the capital.
Trump's vow to take back the canal, and his claim of Chinese influence have prompted mass demonstrations.
By law, Panama operates the canal, giving access to all nations.
But the US president has zeroed in on the role of a Hong Kong company that has operated ports at either end of the canal linking the Atlantic and Pacific oceans for decades.
Under pressure from the White House, Panama has accused the Panama Ports Company of failing to meet its contractual obligations and pushed for the firm to pull out of the country.
The ports' parent company CK Hutchison announced last month a deal to offload 43 ports in 23 countries -- including its two on the Panama Canal -- to a consortium led by US asset manager BlackRock for $19 billion in cash.
A furious Beijing has since announced an antitrust review of the deal.
Pentagon chief says US could 'revive' Panama bases
Panama City (AFP) April 10, 2025 -
US Defense Secretary Pete Hegseth floated the idea on Wednesday of US troops returning to Panama to "secure" its strategically vital canal, a suggestion quickly shot down by the Central American country's government.
Hegseth suggested during a visit to Panama that "by invitation" the United States could "revive" military bases or naval air stations and rotate deployments of US troops to an isthmus the United States invaded 35 years ago.
He also said his country was seeking free passage through the canal for its Navy ships -- which US President Donald Trump had said were "severely overcharged and not treated fairly in any way, shape or form."
Trump, since coming to power in January, has repeatedly claimed that China has too much influence over the canal, which handles about 40 percent of US container traffic and five percent of world trade.
His administration has vowed to "take back" control of the strategic waterway that the United States funded, built and controlled until 1999.
Hegseth suggested on Wednesday the slew of former US military bases that dot Panama could be used again to host US troops.
He said a deal signed with Panama this week was an "opportunity to revive, whether it's the military base, naval air station, locations where US troops can work with Panamanian troops to enhance capabilities and cooperate in a rotational way."
Hegseth cited the possibility of "joint exercises" but the mention of a "rotational" force is likely to raise the hackles of Panamanians, for whom sole ownership of the canal is a source of intense national pride.
The United States has long participated in military exercises in Panama.
However, a longer-term rotational force -- such as the one the United States maintains in Darwin, Australia -- is politically toxic for Panama's center-right leader Jose Raul Mulino.
His government quickly slapped down the idea.
"Panama made clear, through President Mulino that we cannot accept military bases or defense sites," said Panama security minister Frank Abrego in a joint public appearance with Hegseth.
- Perceived threat -
Hegseth also said the United States was seeking an agreement under which its warships could pass through the canal "first, and free."
Jose Ramon Icaza, Panama's Minister for Canal Affairs, said "we will seek a mechanism by which warships and auxiliary ships can have a compensation system for services, that is, a way to make them cost-neutral" but not "free."
The independent Panama Canal Authority (PCA) that manages the waterway said in a statement on Wednesday that it was seeking a "cost-neutral scheme" to "compensate services rendered in security matters for warship tolls."
Under current treaties, the canal is open to all nations and all vessels must pay the same rates according to their capacity and cargo, regardless of their country of origin or destination.
The PCA said the United States recognized Panamanian sovereignty over the waterway, although Hegseth did not mention it in the news conference.
The Pentagon chief's two-day visit has been peppered with comments about China and its influence in Latin America.
He said the United States was not looking for war with China but would counter Beijing's "threats" to the region.
"We do not seek war with China. And war with China is certainly not inevitable. We do not seek it in any form," Hegseth said.
"But together, we must prevent war by robustly and vigorously deterring China's threats in this hemisphere," the former Fox News anchor said in a speech.
- 'Bullying nature' -
China hit back after Hegseth's comments, saying US officials "maliciously attacked China... exposing the United States' bullying nature."
Trump has zeroed in on the role of a Hong Kong company that has operated ports at either end of the canal linking the Atlantic and Pacific oceans for decades.
Hegseth asserted that China-based companies are also capturing Latin American land and infrastructure in strategic sectors such as energy and telecommunications, and that China has too large a military presence in the hemisphere.
"Make no mistake, Beijing is investing and operating in this region for military advantage and unfair economic gain," Hegseth said.
Under pressure from the White House, Panama has accused Hong Kong-backed Panama Ports Company of failing to meet its contractual obligations and pushed for the firm to pull out of the country.
The firm rejected on Wednesday an audit that said it had failed to pay $1.2 billion due under its concession.
The ports' parent company CK Hutchison announced last month a deal to offload 43 ports in 23 countries -- including its two on the Panama Canal -- to a consortium led by US asset manager BlackRock for $19 billion in cash.
A furious Beijing has since announced an antitrust review of the deal.
The United States invaded Panama in 1989 to oust dictator Manuel Noriega, killing more than 500 Panamanians and razing parts of the capital.
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