Panama President José Raúl Mulino has rejected the U.S. State Department’s claim that his country had reached a deal allowing U.S. warships to transit the Panama Canal for free.

Panama President Jose Raul Mulino said on Thursday the U.S. was spreading "lies and falsehoods" after the State Department claimed U.S. government vessels would be able to pass through the Panama Canal without paying.

Panama's president says the State Department's claim of an agreement granting U.S. warships free canal passage was "based on a falsity. And that's intolerable."

The State Department claimed it had struck a deal that would save the U.S. government “millions of dollars a year.”

Panama President José Raúl Mulino has accused the US of spreading "lies and falsehoods" after the US State Department claimed American government vessels were no longer required to pay a fee to transit through the Panama Canal.

The row underscores questions over concessions the Trump administration claimed to have won after pressuring neighbors and allies.