The new administration sees Chinese-owned infrastructure as leverage over the waterway. Panama and some former U.S. military officials say concerns are overblown.

Roughly 5% of all global trade flows through the canal’s 50-mile (80-kilometer) stretch each year, with the largest chunk being cargo heading between the East Coast of the United States and Asia.

A diplomatic storm is brewing over the Panama Canal after Donald Trump suggested that America should retake control of this crucial waterway. The controversy touches on both historical wounds and ...