Trump has been fixated on the question of who controls shipping in the Panama Canal, which was built by Washington over a century ago to link the Pacific and Atlantic oceans and later handed over to Panama.
The Republican leader has repeatedly threatened the use of force to seize the canal, claiming that Hutchison's ownership of two ports, one at either entrance to the canal, gave China control over the strategic waterway which links the Pacific and Atlantic oceans.
Panama rejected the claim that China had de facto control over the canal, which handles 40 percent of US container traffic, while taking various actions to appease Trump.
Its campaign to dodge his fury received a major boost on Tuesday with Hutchison's announcement that it would offload its ports to a group led by giant US asset manager BlackRock.
The sale offers Panama "a way out of the diplomatic crisis without needing to cancel (Hutchison's) concession, which would further damage the investment climate in Panama," Benjamin Gedan, director of the Latin America program at the Washington based Wilson Center think tank told AFP.
Panama's government insisted that it had no hand in Hutchison's sale, insisting it was a deal "between private companies."
Frank Sixt, co-managing director of CK Hutchison, also argued that the deal was "purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports."
But analysts said it came as a relief nonetheless for President Jose Raul Mulino, who had been under fierce pressure to reduce China's footprint in the country, without riling the second-largest user of the canal after the United States.
In January, his government ordered an audit of Hutchison's Panamanian subsidiary, Panama Ports, in what was seen as a shot across the bow at the group owned by businessman Li Ka-shing, one of Asia's richest men.
In the end, one of Hong Kong's largest conglomerates decided to bow to Trump's pressure.
"In the Trump era, business is the new geopolitics," Sabrina Bacal, a Panamanian political scientist, told AFP.
Natasha Lindstaedt, a political scientist at the University of Essex, called the situation "strange."
"Possibly because the company was going to get audited by the Panamanian government and saw it more advantageous to sell than deal with the hassle," she said.
- 'Taking back' the canal -
In his inauguration speech on January 20, Trump declared the United States was "taking back" the Panama Canal, claiming China operated it.
On a visit to Panama two weeks later, US Secretary of State Marco Rubio issued Mulino with an ultimatum to immediately reduce Chinese influence on the canal or face unspecified "measures."
Panama sought desperately to appease the Trump administration by first pulling out of China's massive Belt and Road infrastructure program and then offering to act as a beachhead for Trump's mass migrant deportations.
Panamanian authorities also began piling pressure on Hutchison, which handled 39 percent of the containers that passed through Panamanian docks in 2024, according to the Panamanian Maritime Authority.
The country's Supreme Court agreed to consider two requests to annul the ports concession granted to Hutchison, which Panama's attorney general claimed was unconstitutional.
The concession was first awarded in 1997 and extended for 25 years in 2021.
While Hutchison's sale of the ports is expected to silence Trump's criticism of Chinese involvement in the canal, he could however continue to complain that US vessels are being overcharged to use the waterway.
Last month, the US State Department claimed that Panama had agreed to let US naval vessels through for free -- a claim denied by the Panama Canal Authority, the independent agency that runs the shipping route.
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