Donald Trump has begun his second term as president by ramping up pressure on Panama – threatening to “take back” the Panama Canal and accusing the country of ceding control of the strategically critical waterway to a US rival: China.

The US said Wednesday that its government vessels would sail for free through the Panama Canal, but authorities at the waterway swiftly issued a denial.

The canal’s two biggest ports are operated by a Hong Kong company with global reach. The Trump administration sees a Chinese threat to U.S. security.

Panama is weighing whether to cancel its contract with the Hong Kong-based company that operates ports near the Panama Canal, according to people with knowledge of the situation, a potential concession to defuse President Donald Trump’s threats about countering China’s influence around the key waterway.

Donald Trump’s new trade war is further blurring the lines between Hong Kong and Beijing, threatening to erode the city’s main selling point as a global financial hub.