The U.S. Department of State announced on Wednesday that American government vessels will be able to transit the Panama Canal free of charge.

The Department of Transportation posted on X that "the government of Panama has agreed not to charge fees to U.S. Government vessels transiting the Panama Canal."

The agreement is expected to save the U.S. Government millions of dollars every year.

The Panama Canal Authority didn't immediately respond to an inquiry for comment.

On Sunday, U.S. Secretary Marco Rubio met Panama's president Jose Raul Mulino during his trip to Central America.

Panama is a major focus of the Trump administration after President Donald Trump accused Panama of charging excessive fees for its passage.

Trump stated last month that if the moral and legal principles of this generous gesture are not followed then we will insist on the Panama Canal being returned to us in full and without question.

Mulino dismissed Trump's threats that the U.S. would retake control over the canal it built in large part. For decades, the U.S. administered the territory around the passage.

In 1977, the U.S. signed two accords with Panama that allowed the canal to be returned to Panamanian control. After a period of joint management, the United States gave it back to Panama in 1999.

(source: Reuters)