By Alex Leary and Katy Stech Ferek 

WASHINGTON -- President Trump raised the possibility that trade talks with China could break off, causing stocks to fall.

In comments to reporters on Friday, Mr. Trump indicated the U.S. was prepared for the talks to be canceled. They were tentatively set to take place in Washington next month.

"We'll see whether or not we keep our meeting in September. If we do, that's fine. If we don't, that's fine. But it's time that somebody does what we're doing," he said, referring to tariffs and other measures the U.S. has taken against China over trade.

The Chinese Embassy in Washington didn't respond to a request for comment.

Trade tensions between the U.S. and China escalated sharply last week, when Mr. Trump vowed to impose 10% tariffs, starting Sept. 1, on roughly $300 billion in Chinese imports that aren't currently subject to levies.

The president acted following trade talks in Shanghai last month, where U.S. and Chinese negotiators failed to reach an accord that would see China commit to buying more U.S. farm goods in return for the U.S. easing its restrictions on Chinese telecommunications giant Huawei Technologies Co.

In his remarks Friday, Mr. Trump said the U.S. wouldn't be doing business with Huawei, but said it may yet factor in trade negotiations.

"We're not doing business with [them]," he said. But "that doesn't mean they won't agree to something if and when they make a trade deal."

The federal government is moving forward on several fronts to block Huawei from the U.S. market. U.S. officials have warned that Huawei products could be used to spy on or disrupt telecom networks.

Mr. Trump was referring to government contracts, the White House clarified later Friday.

The Office of Management and Budget this week laid out steps to ensure U.S. government agencies aren't doing business with Huawei. The company has sought to block those moves in court, calling the effort unconstitutional.

At the same time, the Commerce Department is considering granting exemptions that would allow U.S. companies to sell components to Huawei despite a blacklist imposed in May. A senior administration official said that process is continuing despite China's decision this week to suspend U.S. farm purchases. Mr. Trump has suggested that he could ease limits on Huawei in exchange for China buying more U.S. agricultural products.

Fanning trade concerns, China also let the value of its currency decline on Monday following the U.S. move to act on tariffs, leading to the U.S. accusing Beijing of manipulating its currency.

The salvos fired by both countries have stoked volatility on Wall Street, which fears rising trade tensions could disrupt economic growth. The next round of tariffs will also hit items such as smartphones and apparel, where costs are expected to be passed on to consumers.

Mr. Trump insisted that China was bearing the brunt of the trade war by crimping its exports to the U.S.

"As of this moment they're having the worst year that they've had in many, many years, in decades," Mr. Trump said. "And really we're just bringing the system back into order. We have all the cards. We're doing well. Our country is doing fantastically well."

Federal Reserve officials have recently cited evidence that uncertainty stemming from the trade war has weighed on business investment and contributed to a slowdown in manufacturing -- major factors in the central bank's decision to lower interest rates last week.

Another risk from the trade war is the potential for market turmoil that saps consumer and business confidence, causing spending to retreat.

Nick Timiraos contributed to this article.

Write to Alex Leary at alex.leary@wsj.com and Katy Stech Ferek at katherine.stech@wsj.com

(END) Dow Jones Newswires

August 09, 2019 17:13 ET (21:13 GMT)