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President Trump's trade spat with China isn't the only source of tension between the world's two largest economies. Since even before Trump's inauguration, the US's relationship with Taiwan has become an increasingly sensitive issue in Beijing - particularly after Trump publicly mused about abandoning the US's long-standing "One China" policy. Beijing has retaliated by holding a massive live-fire exercise in the Strait of Taiwan (showing off China's expanding military might). And in what looks like a test of corporate allegiance, Beijing has also instigated a mini-diplomatic crisis over its demands that foreign airlines refer to Taiwan on their websites as "Taiwan, China" - a request the White House has dismissed as "Orwellian nonsense."

China

But Beijing isn't about to let this go: Already, Air Canada, Lufthansa, British Airways and other foreign airlines have acquiesced to China's demands, which also included making changes to references for Hong Kong and Macau. But Delta, United and other US carriers have requested an extension beyond Beijing's May 25 deadline for the changes to be instated. Their final deadline is July 25.

China

And in a sign that the request has metastasized into a fully fledged policy dispute, China has reportedly rejected the US State Department's request for talks on the matter, Reuters reported.

In late May, the U.S. State Department presented China’s Foreign Ministry with a diplomatic note requesting consultations on the matter, but the ministry has since refused it, two sources briefed on the situation told Reuters.

"This has definitely become a foreign policy issue," one of the sources said on condition of anonymity, noting that the U.S. government did not view it as a technical matter for bilateral aviation cooperation.

The spat had become "another grain of sand in the wound" amid escalating trade tensions, a second source said, referring to U.S. President Donald Trump’s threat to impose tariffs on billions of dollars worth of Chinese imports to punish Beijing for intellectual property abuses.

While the State Department weighs its next move, US airlines are now caught in a difficult position. Beijing could deny them access to lucrative routes within China by revoking their operating permits - but making the requested changes without the White House's blessing could put them at odds with the US government. The CEO of Delta has said that the airline is working with the US government on the issue, but nobody has given any indication about where the talks are heading.

Delta’s chief executive, Ed Bastian, said at a forum in Washington on Wednesday that the airline was working with the U.S. government but would not say whether it would comply.

"We’re working with the U.S. authorities on the topic and we’ll stay close to our U.S. government," Bastian said, calling it a "good plan of action."

The chief executive of United Airlines, Oscar Munoz, told Reuters in Washington on June 7 that the website issue was a "government-to-government diplomatic issue and again we’ll see what comes out of that and we’ll react accordingly."

Asked if he would defer to the White House, Munoz said that “I fly to both places and I am deferential to our customers, and again this is not something I am going to solve”.

American Airlines said in early June that it had not made changes on its website, and that it was following the direction of the U.S. government.

While US airlines insist the issue should be ironed out "between governments", by refusing to engage, China could be trying to make an important point: US companies can be bent to Beijing's will if their profits are threatened.