Michael Pillsbury, adviser to the White House on China policy, said that Trump would likely escalate the trade war by raising existing tariffs, if no deal is reached.
In an interview in Hong Kong on Thursday, Pillsbury said that Trump had been remarkably restrained in the pressure he has brought to bear on China in the trade field.
Both sides so far have held 12 rounds of talks but failed to work out a deal as China continued to resist Trump's demand for intrusive verification mechanism to supervise Beijing's promise to protect intellectual property rights (IPR) technology transfer and more access to American goods to Chinese markets.
Trump delayed a planned tariff hike on $ 250 billion of Chinese goods as a "gesture of good will" ahead of China's 70th year of National Day celebrations on October 1.
The two countries are preparing for the next round of trade talks in Washington in October.
Does the president have options to escalate the trade war? Yes, the tariffs can be raised higher. These are low level tariffs that could go to 50 per cent or 100 per cent, Pillsbury was quoted as saying by the Hong Kong-based South China Morning Post on Sunday.
Trump's critics were wrong to assume the President was just bluffing when he threatened an all-out trade war, he said.
There are other options involving the financial markets, Wall Street, you know, the president has a whole range of options, he said.
Pillsbury said Trump was not seeking to cripple US-China trade, instead positing that he wanted to increase the level of trade to rectify the deficit.
Meanwhile, a veteran Chinese economic policymaker has for the first time revealed intrusive American demands saying that US is trying to colonise China with a trade deal.
Li Deshui, a former chief of China's statistics bureau, wrote in an article that that the US had specifically demanded that China amend its domestic laws and proposed to establish a permanent bilateral office to debate Beijing's economic policies.
In addition, Washington had requested a one-sided enforcement mechanism that allowed it to impose sanctions on China if it was unhappy with economic policies, but China could not retaliate, Li was quoted as saying by the Post.
The US had also tried to restrict China's hi-tech industry and state-owned enterprises by asking China to open up its financial sector and markets unconditionally, Li said.
It is the first time that a senior figure in Beijing has revealed US' demands in trade talks.
It was impossible for Beijing to agree to any of the US demands as they were asking China to give up its economic sovereignty, Li wrote.
This is a wholly unfair treaty that seeks to colonise China's economy. If this is accepted, then it is giving up China's development path, giving up China's rights of development, and making China a vassal of the US, Li wrote in the article reviewing China's economic achievements and setbacks in the seven decades since the People's Republic of China was founded as well as challenges ahead.
It's almost 2020 and the US is trying to bully China. The US is trying to get what it cannot get in economic competition through a piece of paper it's absurd. The Chinese government and the Chinese people will never agree! Li wrote.