Crunch talks over a UK trade deal with Donald Trump have been thrown into jeopardy by plans for a new Chinese ‘super-embassy’ in London, diplomatic sources have revealed.

White House sources said the US Government was ‘very concerned’ about the risk the embassy posed to America’s interests in the City as a result of Beijing’s spies potentially tapping into sensitive financial cables.

As a result, Washington’s trade deal negotiators are understood to have asked for a ‘China lock’ as part of the talks, which would guarantee the development will not present a security threat to the US.

American officials are now also more concerned about the risk of sharing high-grade intelligence with Britain.

A source said: ‘The issue has led to undoubted tension during the talks. The British have been desperate to play down the concerns, even though their own intelligence services have made their worries clear.’ 

It comes as British negotiators are racing to implement the trade deal struck in principle between Mr Trump and Sir Keir Starmer, which would exempt the UK from crippling steel tariffs imposed by the US President.

No 10 controversially revived plans for the new development on the site of the Royal Mint buildings by the Tower of London, despite them being blocked by the previous government after warnings from MI5 and Scotland Yard.

The Bank of England has also warned No 10 about the risks of allowing it to be built close to sensitive financial centres in the City. Mapping data shows that the proposed site for the embassy lies directly between financial hubs in the City and Canary Wharf and close to three major data centres, including the Stock Exchange.

Earlier this year, The Mail on Sunday revealed that planning documents for the embassy included ‘spy dungeons’ – two suites of anonymous basement rooms and a tunnel, with their purpose redacted for security reasons.

The Government has refused to disclose whether it is backing the plans in order to boost trading relations with the Chinese. Within a fortnight of Rachel Reeves returning from an official visit to China earlier this year, both Scotland Yard and Tower Hamlets Council mysteriously dropped their objections to the project.

Shadow levelling up secretary Kevin Hollinrake has said the lack of information about the ‘dungeons’ was ‘striking’, adding: ‘There is a chilling prospect that it could be used for the abduction, intimidation or torture of anti-Chinese dissidents living in the UK.’

The Chinese have dismissed claims the embassy could be an espionage hub, saying: ‘Anti-China elements are always keen on slandering and attacking China.’

Intelligence activity by Chinese spies is said to be at an all-time-high in the UK, with agents believed to be eavesdropping on political figures by bugging buildings in Whitehall and park benches.