UPDATE 3-Trump downplays Taiwan risk in China talks, expects fair trade deal

(Adds USTR statement on China, paragraphs 1 and 8-10) * Taiwan could figure in to US-China talks * Trade disputes unresolved before Xi-Trump meeting * US is Taiwan's most important international backer By Andrea Shalal and Jarrett Renshaw WASHINGTON, Oct 20 (Reuters) – U.S. President Donald Trump said on Monday he expects to reach a fair trade deal with Chinese President Xi Jinping and downplayed risks of a clash over the issue of Taiwan, even as his top trade negotiator accused Beijing of engaging in "economic coercion." Trump suggested to reporters that China had no designs on invading Taiwan but acknowledged he expected the issue to be on the agenda at a planned meeting with Xi on the sidelines of an economic conference in South Korea next week. Trade tensions between the U.S. and China, the world's two biggest economies, have lingered. Disputes over tariffs, technology and market access remain unresolved days before the meeting. Trump spoke at the start of a meeting with Australian Prime Minister Anthony Albanese where the two signed a critical minerals agreement aimed at countering China. Trump's comments on Taiwan reflect one of the most sensitive issues in U.S.-China relations. Beijing has repeatedly pressed Washington to alter the language it uses when discussing its position on Taiwanese independence. Trump pledged to accelerate deliveries of nuclear submarines to Australia and was asked if U.S. actions in the waters of the Indo-Pacific were a sufficient deterrent to keep Xi from invading Taiwan. "China doesn't want to do that," Trump said, before boasting about the size and strength of the U.S. military. He added: "We have the best of everything and nobody is going to mess with that … I think we'll end up with a very strong trade deal. Both of us will be happy." But U.S. Trade Representative Jamieson Greer took a tougher line later in the day, warning that the U.S. would respond with unspecified action to what he called a "broader pattern of economic coercion" by Beijing against firms that make strategic investments in critical U.S. industries. Officials in South Korea said last week that China's sanctions on U.S.-linked units of shipbuilder Hanwha Ocean threatened to impact ambitious plans for shipbuilding cooperation between Seoul and Washington. "Attempts at intimidation will not stop the United States from rebuilding its shipbuilding base and responding appropriately to China's targeting of critical industrial sectors for dominance," Greer said in a statement. TRUMP SAYS TAIWAN COULD COME UP IN CHINA TALKS Asked by a reporter whether the U.S. might adjust its position on Taiwan independence in order to reach a trade deal with China, Trump said, "We're going to be talking about a lot of things. I assume that will be one of them, but I’m not going to talk about it now." Beijing has ramped up a campaign of military and diplomatic pressure on democratically governed Taiwan, which it views as its own territory. China has never renounced the potential use of force to bring Taiwan under its control. The United States is Taiwan's most important international backer and arms supplier despite the lack of formal diplomatic ties. Beijing regularly denounces any shows of support for Taipei from Washington. (Reporting by Andrea Shalal in Washington and Jarrett Renshaw in Philadelphia; Editing by Trevor Hunnicutt and Matthew Lewis)

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