The U.S. State Department announced on Wednesday that it has secured an agreement with Panama to waive transit fees for American government vessels passing through the Panama Canal.

“The government of Panama has agreed to no longer charge fees for U.S. government vessels to transit the Panama Canal,” the State Department confirmed in a post on X. Officials estimate the move will save the U.S. government millions of dollars annually.

Comunicado del Canal de Panamá. pic.twitter.com/huTl3d7wz7

— Canal de Panamá (@canaldepanama) February 6, 2025

Panama’s President José Raúl Mulino also signaled a shift in the country’s foreign policy, vowing on Sunday to terminate a key development agreement with China following a meeting with Secretary of State Marco Rubio.

U.S. government vessels can now transit the Panama Canal without charge fees, saving the U.S. government millions of dollars a year. pic.twitter.com/G4gV2mHu7O

— Department of State (@StateDept) February 6, 2025

During his visit, Rubio, a former Florida senator, underscored U.S. concerns over Beijing’s growing influence in the region. “The United States cannot, and will not, allow the Chinese Communist Party to continue with its effective and growing control over the Panama Canal area,” he posted on X.

President Donald Trump, a longtime critic of the costly premiums imposed on U.S. ships, has floated the idea of repurchasing the canal. Originally constructed by the United States, the waterway was later handed over to Panama under an agreement finalized during the Carter administration.

A new legislative proposal, the “Panama Canal Repurchase Act,” seeks to grant Trump and Rubio the authority to negotiate a potential buyback of the canal.

According to the State Department, over 70 percent of vessels navigating the canal are bound for or departing from U.S. ports. The passage is also critical for U.S. Coast Guard and Department of Defense operations. Without access, ships would be forced to travel an additional 8,000 miles around South America to reach their destinations.