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.

The Panamanian leader says he was “incredibly surprised” by the statement, as President Trump threatens a U.S. takeover of the strategic waterway.

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.