US President Donald Trump on Tuesday suggested China, saying that he could sign a trade deal with his Chinese counterpart Xi Jinping in Iowa has set off a flurry of excitement in Muscatine, Iowa, a city on the banks of the Mississippi River that has hosted Xi twice since 1985.

During his visit, President Xi received a key to the 24,000-population city after he led an agricultural study group and stayed at the home of a local family.

He also met and befriended then-governor Terry Branstad, who is now Trump’s ambassador to Beijing.

However, Trump said that his administration is considering several occasions and said that Xi would be willing to meet him in the US.

US and Chinese trade negotiators are now racing to complete the text of a “phase one” agreement that could defuse the 16-month trade war. Tariffs have had an outsized impact on farmers in Iowa, a big exporter of soybeans.

Last week, Trump had said that he hoped to sign the trade deal with Xi at a US site, perhaps in Iowa. The location is still in flux, but one Beijing official said Xi is willing to travel to the United States.

Xi returned with much fanfare in 2012 as China’s vice president, visiting that home and meeting with a dozen local “Old Friends” – people he had met in the 1980s.

Those were more hopeful times in US-China relations before Trump kicked off a debilitating tit-for-tat tariff war, and the US Secretary of State declared Xi’s ruling Communist Party “truly hostile to the United States and our values.”

Last month, Trump had said that there was a “really good chance” of reaching a bilateral trade deal with China.

Earlier in August, President had escalated his trade war with China by announcing that he would impose 10 per cent tariff on another $300 billion of Chinese goods that took effect September 1, prompting a swift rebuke from Beijing and jolting global financial markets.

“Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing,” Trump tweeted