Panama's president says the State Department's claim of an agreement granting U.S. warships free canal passage was "based on a falsity. And that's intolerable."

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.

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