US president elect Donald Trump has described Panama Canal fees as "exorbitant" and is demanding reductions under a threat of returning the canal to US administration.

Panama President Jose Raul Mulino hit back at Trump's comments as an affront to Panamanian sovereignty. President Mulino denied that canal tolls are inflated and stressed that sovereignty over the waterway is not negotiable

"Every square metre of the Panama Canal and its adjacent zones is part of Panama, and will continue to be," he said.

Mr Trump has criticized Panama for its "exorbitant prices and rates of passage" imposed on American naval and merchant vessels using the Panama Canal.

In a post on his Truth Social platform, he demanded a reduction in the fees or the return of canal control to the US.

Mr Trump claimed that Panama's charges were unreasonable, particularly given "extraordinary" US generosity towards Panama. He reportedly referred to the fees as a "complete rip-off" and pledged to take swift action to address what he viewed as the unfair treatment of the US.

The US is the canal's largest user, accounting for roughly 75 per cent of the cargo passing through the 82-kilometre route. However, a severe drought has recently disrupted canal operations, affecting shipping between the Atlantic and Pacific Oceans.

The Panama Canal Authority announced that the canal contributed US$2.47 billion to Panama's treasury during the 2024 fiscal year, representing a second consecutive year of declining contributions.

The Panama Canal, largely constructed by the US and completed in 1914, was for many years administered directly by the US. After a campaign to claim the canal zone for Panama, the US and Panama in 1977 signed a treaty that put into place a period of joint administration and set out a process for full control of the canal to be transferred to Panama, providing Panama guaranteed the permanent neutrality of the canal.

On December 31,1999 the Panama Canal Authority (ACP) assumed command of the waterway and the Panama Canal Zone was fully returned to Panama.

Mr Trump has criticized the transfer of the canal to Panama as unwise. He has also raised concerns about the canal's susceptibility to foreign influence, particularly from China, which is the canal's second-largest customer. The Hong Kong-based Hutchison Ports controls two of the five ports near the Panama Canal: Balboa on the Pacific side and Cristobal on the Atlantic side.