Taiwan severed diplomatic ties with Panama on Tuesday to "uphold the sovereignty and dignity of the nation" one day after Panama cut ties with its longtime ally in favor of establishing relations with China.
Taiwan's President Tsai Ing-wen called Panama's decision "deeply regrettable" and issued a defiant message to Beijing that the island would not back down from its engagement with the international community.
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"Although we have lost a diplomatic ally, our refusal to engage in a diplomatic bidding war will not change," Tsai said in a speech Tuesday.
"We are a sovereign country. This sovereignty cannot be challenged nor traded. China has continued to manipulate the ‘one China' principle and pressure Taiwan's international space, threatening the rights of the Taiwanese people, but it remains undeniable that the Republic of China [Taiwan] is a sovereign country. This is a fact China will never be able to deny," she continued.
Panama's government announced on Monday that it recognized "only one China in the world" and considered Taiwan an "inalienable part" of it. The statement directly undermined Taiwan's interpretation of the longstanding "one China" principle.
Only 20 countries, including the United States, and the Vatican now recognize Taiwan's sovereignty. The island has faced a series of diplomatic setbacks contributing to its isolation over the past decade.
Taiwan's Ministry of Foreign Affairs announced Tuesday it would immediately close its embassy in Panama City, withdraw all staff, and end all bilateral cooperation and aid programs in the country. The de facto embassy said Panamanian President Juan Carlos Varela "caved in to" economic pressure from Beijing.
"The ROC government strongly condemns Panama's act, and reiterates that it will not engage in checkbook diplomacy with the Beijing authorities," Taiwan's diplomatic arm said in a statement.
The move marks a significant setback for Taiwan.
Tsai visited Panama one month after taking office in June 2016 for the opening of the expanded Panama Canal. She returned to Central America in January for the inauguration of Nicaragua President Daniel Ortega, where she also visited Guatemala and Honduras to reinforce Taipei's commitment to its allies.
Taiwanese optimism that Washington would deepen its relationship with Taipei spiked after President Donald Trump engaged in a brief phone call with Tsai in December, but this has all but faded after the president's April meeting with Chinese President Xi Jinping in Florida.
Trump told Reuters in an interview shortly after the meeting that he would consult with Xi before again speaking to Tsai to avoid creating problems with the Chinese president.
Tsai warned Xi on Tuesday that Taiwan would "not sit idle" as its interests were "threatened and challenged," vowing never to surrender to Beijing's "intimidation."