Panama is bracing for potential conflict as tensions escalate in the region, with both political and military leaders preparing for the possibility of war.

Marco Rubio’s upcoming visit to Panama is set to provide a glimpse into the future of U.S. policy in the region. The visit will likely shed light on whether the next four years will see America taking a more imperial approach or engaging in high-stakes negotiations over its interests, particularly regarding the Panama Canal.

In Panama, tensions are running high. Former President Ernesto Pérez Balladares is bracing for a worst-case scenario—an American invasion. As he sat in his office, sipping iced coffee, he noted the potential for many casualties on Panama’s side, and the inevitable international backlash the U.S. would face.

At the same time, President Trump’s envoy to Latin America, Mauricio Claver-Carone, has been encouraging Panamanian officials to offer concessions to avoid escalation. One suggestion was for Panama to allow U.S. Navy and Coast Guard ships to transit the canal for free, potentially appeasing American demands without directly challenging Panama’s sovereignty.

Interviews with Panamanian and U.S. officials indicate that a deal could still be reached that reaffirms American dominance in the region while preserving Panama’s control over the canal. However, there’s a risk of miscommunication and escalation, particularly as Trump’s combative approach rubs up against the country’s political elite.

Balladares, in reflecting on the growing tensions, warned that Panama might retaliate by opening its borders to the flow of South American migrants heading north. Such a move would dramatically alter the dynamics in the region and could exacerbate the crisis.

Rubio’s visit will test whether direct diplomacy can resolve this crisis that began with Trump’s Twitter rants late last year. Trump’s claims about Chinese military presence at the canal have been widely disputed in Panama, but the U.S. continues to press on with its demands, despite the lack of factual support.

So far, one concession has been made, with Panama auditing ports operated by a Chinese conglomerate at the canal. But this has done little to calm the rising tensions. Trump’s inaugural speech included a vow to “take back” the canal, a statement that did not sit well with Panamanian leaders, who filed a complaint with the U.N. Security Council in defense of their sovereignty.

As Rubio prepares for his diplomatic mission, signals have emerged from the Trump administration suggesting a potential shift in tone. State Department spokesperson Tammy Bruce has emphasized the importance of a balanced relationship with Panama, offering benefits in exchange for trust and partnership.

A key issue in the ongoing talks remains China’s growing influence in Panama. Beijing has made substantial inroads in Latin America, and Panama’s relationship with China has become a point of contention in U.S.-Panama relations. While American critics argue the U.S. should take more action to counter China’s presence, Panama’s elites are reluctant to distance themselves from such a lucrative trading partner.

The Chinese community in Panama, small but historically significant, continues to play an active role in the country’s cultural and economic life. The increasing Chinese presence in Panama, including plans for a new embassy and trade deals, has raised alarms in Washington, but Panama is wary of overreacting to U.S. concerns.

Despite these tensions, Panama has worked with the U.S. on issues like migrant flows, and has been receptive to American input on canal operations. However, Trump’s aggressive rhetoric has made it clear that he’s willing to push for control in a way that Panama finds both insulting and harmful.

As Rubio prepares to meet with Panamanian leaders, the question remains whether diplomacy will be enough to defuse the crisis, or if this will be the beginning of a more intense showdown between two countries with competing interests in the future of the Panama Canal.