What Happened
The trade fight between the United States and China is adding pressure to an already weakened flow of liquefied natural gas, or LNG, through the Panama Canal. The channel remains a key route for global commerce, especially for cargo linked to the two largest users of the waterway: the United States and China.
In 2024, cargo moving to and from the United States totaled more than 160.12 million long tons, while cargo linked to China reached 45.04 million long tons. But the LNG segment has been under strain for years, first from drought-related restrictions and now from shifting trade patterns tied to tariffs and lower Chinese purchases of U.S. gas.
For 2024, LNG transits through the canal fell 64.72% compared with fiscal 2023, dropping from 326 vessels to 115. In 2022, that segment had recorded 374 crossings.
Why LNG Traffic Fell
The decline began mainly with the drought that reduced the canal’s operating capacity and forced shipping lines to rethink their routes. With less water available, fewer vessels could pass, and shipping companies increasingly chose other passages rather than wait for a slot or compete in auctions.
Many LNG ships that once crossed Panama on the way to Asia now increasingly sail around the Cape of Good Hope or, before conditions worsened in that region, through the Suez Canal. The change reflects a broader reshaping of energy logistics, as suppliers and buyers adapt to weather constraints, pricing, and geopolitical pressure.
Most LNG vessels using the Panama Canal leave plants in the U.S. Gulf of Mexico and head toward markets in Japan, South Korea, and China. Those Asian buyers remain central to the LNG trade, but the balance has shifted as China cut back purchases from the United States.
China’s Role in the Market
The latest trade confrontation has intensified uncertainty across shipping and energy markets. The United States has imposed tariffs of up to 145% on Chinese goods, while China has answered with levies of up to 125% on U.S. products. That escalation has raised concern about higher transport costs, inflationary pressure, and a possible slowdown in global economic growth.
China halted purchases of U.S. LNG, but the immediate effect on Panama Canal traffic is expected to be limited because the bigger risk lies with container shipping. Higher tariffs on Chinese goods could reduce consumer demand in the United States and eventually weaken cargo volumes moving through the waterway.
China remains a major LNG consumer worldwide, although it relies heavily on supplies from Qatar, Oman, the United Arab Emirates, Australia, and Russia. It has also reduced its purchases of U.S. LNG from about 9 million tons a year before 2020 to 4.5 million tons annually in recent years.
What It Means for the Canal
The canal’s budget projects 293 LNG transits in fiscal 2025, but the first half of the year has remained far below that pace. Between October 2024 and March 2025, only 19 LNG vessels crossed the canal, compared with 75 in the same period of fiscal 2024.
Former Panama Canal administrator Jorge Luis Quijano said the drop in LNG transits began mainly two years ago because of the drought, which reduced available slots and made the route less attractive for carriers. He noted that demand from Japan and South Korea remains important and that both countries have invested heavily in U.S. liquefaction plants.
The wider LNG market continues to grow, with the United States, Qatar, and Australia among the leading exporters. But the Panama Canal faces a shifting energy map in which shipping routes, contracts, and customer demand all play a role in determining how much LNG can still move through the waterway.