Panama’s president has rejected as “lies” a US statement that the Central American country has agreed to allow American warships to transit the Panama Canal free of charge, escalating a diplomatic battle with the Trump administration.
President José Raúl Mulino said on Thursday that the bilateral relationship with Washington could not be conducted based on “lies and falsehoods”.
“This is intolerable, simply intolerable,” he said at a weekly news conference.
Mulino’s comments came a day after the US State Department said that Panama’s government had agreed to stop charging fees for US government vessels passing through the strategic waterway, which connects the Pacific and the Caribbean.
“This saves the US government millions of dollars a year,” the department said in a post on X. US navy use of the canal is infrequent, with about 40 vessels transiting annually.
Aircraft carriers are too large to pass through, while the vast majority of canal traffic is merchant shipping.
“Why are they making an important institutional statement from the entity that governs the foreign policy of the United States, under the President of the United States, based on a falsehood?” Mulino asked on Thursday.
US President Donald Trump has been threatening to “take back” the canal, which was built by US engineers and was run by the US from its opening in 1914 until a treaty in 1977 agreed a staged handover to Panama, completed in 1999.
Trump’s complaints have centred on what he says is increased Chinese influence over the waterway and higher fees charged to ships since a major drought in 2023 affected traffic.
Mulino, a pro-US conservative, initially responded by insisting that the canal was and would remain under Panamanian control. But in response to US pressure, the government has begun auditing contracts for terminals at each end of the canal held by Hutchison Ports, a subsidiary of Hong Kong-based conglomerate CK Holdings.
Panama has also significantly stepped up patrolling and fencing of the Darién Gap, a 60-mile stretch of once impenetrable jungle that had become a major route for migrants crossing illegally en route to try to enter the US — another focus for Trump.
Under the 1977 treaty that handed over the canal and a surrounding stretch of land on either side to Panama, the waterway must be run in a neutral and open way, treating all countries alike. Trump has long decried the treaty, reached by then-president Jimmy Carter, as a bad deal for the US, and wants to retake control.
US Secretary of State Marco Rubio visited Panama last weekend and warned Mulino that Trump had determined that China posed a threat to the canal and had violated the neutrality treaty.
The canal is operated and its fees set by the government-nominated Panama Canal Authority, which said on Wednesday that it had not made any adjustments to its pricing.