US Secretary of State Marco Rubio has since rowed back on his department’s claim, but called the fee for American vessels “absurd” due to a treaty binding the US to protect the canal if it comes under attack.

US President Donald Trump has repeatedly voiced his desire to regain control of the waterway since taking office and has refused to rule out retaking it by force. He is due to speak with Mulino on Friday.

The Panama Canal is a 51-mile (82km) passage that links the Atlantic and Pacific oceans across the Central American country.

All vessels are required to pay a fee, based on size and type, for crossing the waterway but US ships have priority of passage.

In a post on X on Wednesday, the State Department wrote: “U.S. government vessels can now transit the Panama Canal without charge fees, saving the U.S. government millions of dollars a year.”

Mulino reacted to the statement by saying he rejects “this method of managing bilateral relations on the basis of lies and falsehoods.”

He said he asked his ambassador in Washington to take “firm steps” to reject the claim, calling it “simply and plainly intolerable.”

Mulino added that US government vessels, including navy vessels, paid “$6-7m [£4.8-5.6m] a year” for the right of passage.

“It’s not as if the canal toll is breaking the economy of the United States,” he added.

The Panama Canal Authority (ACP) also made a statement saying it had “not made any adjustment” to tolls, adding that it was open to establishing a dialogue.

After Rubio and Mulino’s meeting, Panama announced it would not renew its membership of China’s infrastructure-building programme, known as the Belt and Road Initiative.

Rubio welcomed this move, calling it “a great step forward”, though Panama denied that the decision had been made at the request of the US.

Trump has expressed fears that China could close the canal to the US in the event of a crisis – something Panama and China have strongly denied.

On Wednesday, China’s Foreign Affairs spokesman, Lin Jian, said its partnership with Panama was yielding “fruitful results” and urged the country to “resist external interferences.”

Rubio met the canal’s administrator, Ricaurte Vásquez Morales alongside Mulino on Sunday. America’s top diplomat demanded that Panama make “immediate changes” to China’s “influence and control” over the waterway.

This echoed Trump’s inaugural address, where he stated that the canal was being operated by China and he wanted to “take it back.”

Mulino has denied these allegations and rejected the plan, saying that the trade route “is and will remain” in Panama’s hands.

The US built the canal in the early 20th Century but, after years of protest, President Jimmy Carter signed a treaty with Panama in 1977 to gradually hand back control of the waterway. Trump has called this “a big mistake” since returning to office.

US Secretary of State Marco Rubio has been on a tour of Central America to discuss migration and drug trafficking in the region.

Rubio’s statement responding to Mulino’s accusation of US “lies” was given at his last stop, the Dominican Republic.

In recent days Trump has threatened to take the canal back into US control, accusing Panama of “ripping off” the US by charging high shipping rates.

In a message posted to his Truth Social account on Wednesday, Trump wrote: “Merry Christmas to all, including to the wonderful soldiers of China, who are lovingly, but illegally, operating the Panama Canal”.

Mulino called the claim “nonsense” and said that there is “absolutely no Chinese interference”.

“There is not a single Chinese soldier in the canal,” he told reporters in Panama City.

Mulino also rejected the possibility of reducing tolls for US ships or ceding control of the canal, a major shipping channel which connects the Atlantic and Pacific oceans.

“The canal is Panamanian and belongs to Panamanians. There’s no possibility of opening any kind of conversation around this reality,” he said.

After breaking ties with Taiwan, Panama established diplomatic ties with China in 2017, and Mulino said relations between the two countries were “respectful, well-managed … in terms of what is in the interest of both countries.

“His comments came a day after Trump said he would nominate a Florida lawmaker to be his ambassador to Panama.

Kevin Marino Cabrera, a Republican commissioner in Miami-Dade County, worked for Trump’s 2020 campaign and this year was Florida’s representative to the Republican National Committee.

Announcing his pick in a Christmas Day post on his Truth Social network, Trump said Cabrera “will do a fantastic job representing our Nation’s interests in Panama!”.

The president-elect also repeated claims that Panama is “ripping us off”.

On Sunday, Trump told a crowd of conservative activists: “The fees being charged by Panama are ridiculous, highly unfair.

“If shipping rates are not lowered, Trump said, “we will demand that the Panama Canal be returned to us, in full, quickly and without question”.

Trump has also said he did not want the Panama Canal “falling into the wrong hands” and specifically cited China.

China is the second-largest user of the Panama Canal after the US, according to data, and also has major investments in the central American country.

On Christmas Day, Trump fired off dozens of messages defending his policies and nominations, and repeated suggestions that the US annex Greenland and Canada.

It is unclear how serious Trump is about the territorial moves, or how they would be accomplished.

Up to 14,000 ships travel through the 51-mile (82km) canal each year, including container ships carrying cars, natural gas and other goods, and military vessels.

Colombia, France, and later the United States controlled the territory surrounding the canal during construction. France began work on the canal in 1881, but stopped in 1889 because of lack of investors’ confidence due to engineering problems and a high worker mortality rate.

The US took over the project in 1904 and opened the canal in 1914. The US continued to control the canal and surrounding Panama Canal Zone until the Torrijos–Carter Treaties provided for its handover to Panama in 1977.

After a period of joint American–Panamanian control, the Panamanian government took control in 1999. It is now managed and operated by the Panamanian government-owned Panama Canal Authority.

Canal transit costs have increased over the past year due to a historic drought, according to shipping industry website Lloyd’s List.

A Hong Kong-based company, CK Hutchison Holdings, manages two ports at the canal’s entrances.