Liu voiced a measured optimism on reaching a deal but said there were "issues of principle" on which China would not back down.

The United States escalated a tariff war with China on Friday by hiking levies on $200 billion worth of Chinese goods in the midst of last-ditch talks to rescue a trade deal. Trump issued orders for the tariff increase, saying China "broke the deal" by reneging on earlier commitments made during months of negotiations.

"Negotiations have not broken down," Liu, China's chief negotiator in the talks, said, according to state television.

"Quite the opposite, I think small setbacks are normal and inevitable during the negotiations of both countries. Looking forward, we are still cautiously optimistic," Liu said.

China strongly opposes the latest U.S. tariff hike, and as a nation, has to respond to that, Liu told a small group of Chinese reporters in the video clip.

"Right now, both sides have reached mutual understanding in many things, but frankly speaking, there are also differences. We think these differences are significant issues of principle," Liu said. "We absolutely cannot make concessions on such issues of principle."

He added that talks would continue in Beijing, but gave no details.

But underscoring a lack of progress in the talks, Trump ordered a further escalation of tariffs.

Trump's move would subject about $300 billion worth of Chinese imports to punitive tariffs, U.S. Trade Representative Robert Lighthizer said in a statement.

Lighthizer said a final decision has not been made on the new duties, which would come on top of an early Friday tariff rate increase, to 25% from 10%, on $200 billion worth of Chinese imports.

REUTERS