WASHINGTON (Reuters) - The U.S. Department of State said on Wednesday American government vessels can now transit the Panama Canal without charge fees.

"The government of Panama has agreed to no longer charge fees for U.S. government vessels to transit the Panama Canal," the department said in a post on X.

It said the agreement will save the U.S. government millions of dollars each years.

The Panama Canal Authority did not immediately respond to a request for comment.

U.S. Secretary of State Marco Rubio met with Panama's President Jose Raul Mulino on Sunday during a trip to Central America.

Panama has became a focal point of the Trump administration as President Donald Trump has accused the Central American country of charging excessive rates to use its passage.

"If the principles, both moral and legal, of this magnanimous gesture of giving are not followed, then we will demand that the Panama Canal be returned to us, in full, and without question," Trump said last month.

Mulino has dismissed Trump's threat that the U.S. retake control of the canal, which it largely built. The U.S. administered territory surrounding the passage for decades.

But the U.S. and Panama signed a pair of accords in 1977 that paved the way for the canal's return to full Panamanian control. The United States handed it over in 1999 after a period of joint administration.