Philip Hammond is not going to China this weekend for trade talks, following reports that Beijing scuppered advanced preparations for a meeting after the defence secretary, Gavin Williamson, threatened to deploy a warship in the Pacific.

The UK chancellor was expected to meet the Chinese vice premier, Hu Chunhua, but Treasury sources said the trip was never confirmed. It is believed that there is an internal row brewing between the Treasury and the defence department over Williamson’s remarks, which the former chancellor George Osborne described as a throwback to an era of “gunboat diplomacy”.

The Sun said China had been expected to lift its bans on British poultry and cosmetics not tested on animals, which could have opened up access to markets worth around £10bn over five years.

A Treasury spokeswoman stopped short of confirming that the trip, preparations for which were reportedly well advanced, had been cancelled. “The chancellor is not travelling to China at this time,” she said. “No trip was ever announced or confirmed.”

The department refused to comment further, but the Press Association said a source suggested the visit would be rescheduled and it is understood there is intense irritation within the Treasury following Williamson’s speech.

Hu reportedly scrapped the plans hours after Williamson announced that the aircraft carrier HMS Queen Elizabeth would be sent to the Pacific, where Beijing has been involved in a dispute over territorial claims in the South China Sea, for its first operational cruise, expected to be in 2021.

He said the UK was prepared to use lethal force to deter countries that flout international law, in an apparent reference to Chinese expansion.

Last September another British warship, HMS Albion, sailed near islands claimed by China in an effort to demonstrate that the UK does not recognise claims beyond the internationally agreed 12-mile limit. China described the action as provocative.

The Financial Times reported that British officials said the Chinese ambassador had raised Williamson’s apparent threat in a “scheduled call” with the Foreign Office. The paper said that Downing Street had not denied that Beijing had expressed its displeasure with the minister’s speech.

A government official was reported to have branded Williamson’s speech, in which he also claimed Brexit represented an opportunity for Britain to enhance its military threat, as “idiotic”, while the defence secretary was also criticised by Osborne, now the Evening Standard editor, for sending mixed messages.

He told BBC Radio 4’s Week in Westminster that the government appeared unable to decide whether China was an economic partner or a military threat. “I think it’s very difficult to work out what the British government’s China policy is at the moment,” he said.

“You’ve got the defence secretary engaging in gunboat diplomacy of a quite old-fashioned kind, at the same time as the chancellor of the exchequer and the foreign secretary are going around saying they want a close economic partnership with China.”

Osborne, who attempted to forge closer economic relations with China during his time in government, added: “Ultimately it’s the responsibility of Theresa May to sort this out. At the moment it looks all at sea.”

China is one of the UK’s largest trading partners, and the second largest non-EU partner after the US. In 2017, the UK ran a trade deficit of around £23bn with China, making up 7% of its imports.

Despite frenetic efforts to ensure the continuity of international trade, the government has secured agreements covering only £16bn of the near-£117bn of British trade with just seven of the 69 countries that the UK currently trades with under preferential EU agreements that end after Brexit.