0735 GMT January 23, 2018
Relations between Trump's White House and the Palestinians were already tense after the US president's recognition of Beit-ul-Moqaddas as Israel's capital last month. The December 6 announcement concerning the city led Palestinian President Mahmoud Abbas to say the United States could no longer play any role in the Middle East peace process, AFP wrote.
Trump's threat in a tweet on Tuesday to try to force the Palestinians into negotiations led to further outrage, though Israeli ministers lauded the move.
The Palestinians rely heavily on international aid, with many analysts, saying such assistance helps maintain stability in a volatile region.
"We pay the Palestinians HUNDRED OF MILLIONS OF DOLLARS a year and get no appreciation or respect," Trump tweeted. "With the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them?"
It was not immediately clear whether Trump was threatening all of the budget, worth $319 million in 2016, according to US government figures.
The United States has long provided the Palestinian Authority with budgetary support and security assistance.
Abbas's spokesman said they were not against negotiations, but that talks should be "based on international laws and resolutions that have recognized an independent Palestinian state with Beit-ul-Moqaddas as its capital".
"Al-Quds is the eternal capital of the state of Palestine and it is not for sale for gold or billions," Nabil Abu Rudeina said.
Senior Palestinian official Hanan Ashrawi said in a statement that "we will not be blackmailed".
"President Trump has sabotaged our search for peace, freedom and justice," she said.
"Now he dares to blame the Palestinians for the consequences of his own irresponsible actions!"
However, several Israeli ministers voiced support for Trump.
Culture and Sport Minister Miri Regev, from Prime Minister Benjamin Netanyahu's Likud party, said "you cannot on the one hand receive $300 million in American aid per year and at the same time close the door on negotiations".
The Trump's Beit-ul-Moqaddas recognition sparked almost universal diplomatic condemnation and deadly protests in the Palestinian territories.
It also prompted Abbas to cancel a planned meeting with Vice President Mike Pence. Christian and Muslim leaders in Egypt took similar steps.
Pence was forced to delay a December visit to the Middle East until later this month, and aides on Tuesday rejected rumors of further delays.