Panama's President Jose Raul Mulino on Thursday rejected the United States' claim that it negotiated free passage for government vessels through the Panama Canal as an "absolute falsehood."

The Panama Canal Authority, which runs the waterway linking the Caribbean Sea with the Pacific Ocean, has also rejected the claim by the US State Department that US government vessels would go through for free.

The canal authority, an autonomous agency overseen by the Panamanian government, said it had not made any changes to charge fees or rights to cross the canal, adding its statement was directly in response to the US claims.

The US State Department had said earlier that Panama's government had agreed to no longer charge crossing fees for US government vessels, in a move that would save America millions of dollars a year.

"With total responsibility, the Panama Canal Authority, as it has indicated, is willing to establish dialogue with relevant US officials regarding the transit of wartime vessels from said country," the canal authority responded.

Panama has became a focal point of the Trump administration as the president has accused the Central American country of charging excessive rates to use its trade passage, one of the busiest in the world. (Reuters)