Panamanian President José Raúl Mulino on Thursday denied the U.S. State Department’s claim that his country had agreed to allow U.S. government vessels to transit the Panama Canal for free, an assertion that has upended the two countries’ talks on the waterway.

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

The Panama Canal Authority put out its own terse statement saying it had “not made any adjustments” to the fees.