President Donald Trump on Friday stopped short of saying he will sign legislation supporting the Hong Kong pro-democracy movement that has cast a shadow over his efforts to cinch a trade deal with Beijing.
Six weeks after it was announced, the "phase one" bargain between Washington and Beijing appears no closer to becoming a reality as both sides claim they are prepared to hold out for better terms.
In Beijing on Friday, President Xi Jinping said China wants a deal but is "not afraid" to "fight back" if necessary.
Trump's riposte came several hours later in a freewheeling live dial-in to Fox News in which he told on-air hosts the deal was "potentially very close" but that Xi was under greater pressure to strike a bargain.
He also said that, when it comes to Hong Kong, he is balancing competing interests.
Beijing has denounced new US legislation adopted this week to support the restive semi-autonomous city's democracy movement.
US regulators on Friday also turned up the pressure on Chinese telecoms firms ZTE and Huawei, branding them threats to national security and barring them from multi-billion-dollar subsidy programs for wireless equipment and services.
The tussle over Huawei in particular has landed squarely in the middle of the trade conflict with China, raising the question of whether Trump could offer some concessions on access to the US market to grease wheels in the trade negotiations.
The world's two biggest economies have been locked in a bruising trade conflict for more than a year, hitting each other with volleys of tariffs on hundreds of billions of dollars' worth of goods.
"As we always said, we don't want to start the trade war but we are not afraid," Xi told former US officials and other foreign dignitaries at a meeting at Beijing's Great Hall of the People.
"When necessary we will fight back but we have been working actively to try not to have a trade war," he told the group, which included former US Secretary of State Henry Kissinger, former US Treasury Secretary Henry Paulson and Trump's former economic adviser Gary Cohn.
China has insisted on a rollback of existing tariffs, to which Trump has said he did not agree. American officials want large purchases of US farm exports.
The Chinese leader said the trade talks "may affect the future prospects of the world economy" and China holds a "positive attitude."
Diana Choyleva, chief economist at Enodo Economics, said Xi's comments do not mean that Beijing is about to go on the offensive but it shows that it is "not going to budge."
Trump has fostered distrust among the Chinese, making Xi "very determined that there is no point to really give up much," Choyleva told AFP at the New Economy Forum.
Trump launched his trade war in March 2018, demanding that China end practices widely seen as unfair -- such as forced technology transfers from US firms, and massive subsidies given to Chinese firms.
Xi said he told International Monetary Fund chief Kristalina Georgieva, who met him earlier, that China will continue on the path of financial reform and opening but "the precondition is that we will ensure security of our nation's financial sovereignty."
Xi warned that a "technological iron curtain" would "affect the future prospect of humanity."
Paulson, the former US Treasury chief, told Xi that 5G wireless technology could be "either a potential area of conflict or cooperation for China and US."
"I believe key to minimizing conflict is if we can develop shared standards for emerging technologies," he said.
Kissinger, who warned at the forum Thursday that the trade war could snowball into armed conflict, told Xi that "our nations have to cooperate if there is to be a prosperous international order."
Kissinger also met with the vice chairman of China's Central Military Commission, Xu Qiliang, according to state news agency Xinhua, which made no mention of the other US officials.
Sino-US military ties "should be a stabilizer for bilateral relations," Xu said, according to Xinhua, adding that both sides should "strengthen strategic communication ... to avoid misunderstandings and misjudgment."
