Jose Raul Mulino, the president of Panama, announced that his administration would not extend a 2017 agreement to join China's Belt and Road Initiative in response to repeated threats by US President Donald Trump to reimpose American authority over the Panama Canal.

Mulino made the decision during a meeting with US Secretary of State Rubio, who warned the Panamanian leader to lessen Chinese influence over the Panama Canal right once or risk US reprisal. The new US government had put pressure on Mulino to handle a canal that is essential to international trade, but Mulino had refused. After the discussion, he told reporters that Rubio had "no real threat of retaking the canal or the use of force," CNN reports. The leader of Panama mentioned that he had discussed U.S. concerns about China's presence near the canal. He also hinted that the agreement with China’s Belt and Road Initiative (BRI) might end sooner than expected, suggesting that Trump’s warnings had influenced the decision.

He spoke on Sunday about Rubio's first international trip as the top US diplomat, saying, "I think this visit opens the door to build new relations … and try to increase as much as possible US investments in Panama." Mulino has consistently stated that, despite Trump's repeated threats, Panama's sovereignty is unquestionable. On Sunday (local time), US President Donald Trump reaffirmed his threat to retake the Panama Canal, pointing to a breach of the pact and China's expanding sway over the region. Trump told reporters that the Canal was given to Panama "foolishly" and that "something very powerful" would occur if it was not returned to the United States. “Secretary of State (Marco) Rubio is in Panama right now, and we’re talking about the Panama Canal," he said. “What they have done is terrible. They violated the agreement. China’s running the Panama Canal. It was not given to China, it was given to Panama. But they violated the agreement and we’re gonna take it back or something very powerful is going to happen," he added.

Before officially becoming president on January 20, Trump repeatedly warned that the U.S. might take back control of the Panama Canal. He accused Panama of breaking its promises from the 1999 transfer and allowing China to take over its operations—claims that Panama strongly denied. The canal was handed over to Panama under a 1977 treaty, with the condition that it would remain neutral. The agreement also allowed the U.S. to step in militarily if internal conflicts or foreign interference threatened its operations. Today, more cargo passes through the canal than when the U.S. controlled it. Panama joined China’s Belt and Road Initiative (BRI), a project that funds infrastructure and development. However, critics argue that it puts poorer countries in heavy debt to China. As part of this move, Panama stopped recognising Taiwan and instead established diplomatic ties with Beijing. The US claims that this has led to China gaining influence over the Panama Canal.

“Secretary Rubio made clear that this status quo is unacceptable and that absent immediate changes, it would require the United States to take measures necessary to protect its rights under the treaty," the State Department said in a summary of the meeting between Rubio and Mulino. 

Mulino added that Panamanian authorities are auditing a Chinese-affiliated corporation that runs two terminals near the canal. “We have to wait until that audit ends before we can reach our legal conclusions and act accordingly," he said. He was talking about the Panama Ports Company, which is part of a Hong Kong-based company called CK Hutchison Holdings. This company, Hutchison Ports, is one of the biggest port operators in the world. It manages 53 ports in 24 countries, including some in US-friendly nations like the UK, Australia and Canada. Mulino also mentioned that Panamanian officials discussed with Rubio the idea of expanding a program to send back migrants who are in Panama illegally. However, he made it clear that the US would have to cover the costs of these repatriation flights. 

Prior to the meeting, some 200 people marched through the city with Panamanian flags in hand, yelling "One territory, one flag," "Long live national sovereignty," and "Marco Rubio out of Panama." Following their arrest by riot police before they reached the presidential palace, several set fire to a banner featuring pictures of Trump and Rubio.