Trump's former ambassador to Vietnam highlighted the main reason China may hesitate to strike a trade deal with the U.S.

The bad news is that China, perhaps not surprisingly to some, has totally violated its agreement with us," said Trump.

But a U.S. official told Reuters that it appears China was moving slowly on promises to issue export licenses for rare earths minerals. The deal called for China to lift trade countermeasures that restrict its exports of the critical metals needed for U.S. semiconductor, electronics and defense production.

China’s factory activity contracted in May although the decline slowed from April as the country reached a deal with the U.S. to slash President Donald Trump’s sky-high tariffs.

China’s factory activity contracted at a slower rate in May after a reprieve in the tariff war with the US unclogged trade flows, even as weak domestic demand continues to weigh on the economy.

China's factory activity likely contracted for a second month in May, a Reuters poll showed on Friday, suggesting trade tensions with major export markets are weighing on manufacturers' minds as the world's top two economies seek a way out of a tariff war.