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Davos (Switzerland) (AFP)

President Donald Trump on Thursday accused Palestinians of disrespecting the United States and threatened to withhold aid worth hundreds of millions of dollars until they accede to US-brokered talks.

In a significant sharpening of his rhetoric against the leadership in Ramallah, Trump said the Palestinians had "disrespected us a week ago by not allowing our great vice president to see them."

"We give them hundreds of millions," Trump said during a meeting with Israeli Prime Minister Benjamin Netanyahu in Davos, Switzerland.

"That money is not going to them unless they sit down and negotiate peace."

The Trump administration is pressing sceptical Palestinians to enter a US-sponsored peace process that has so far appeared to offer much to their arch-foes Israel.

Palestinians were especially enraged by Trump's recent decision to recognise Jerusalem as Israel's capital -- which for decades both sides agreed would be the subject of negotiation.

Amid deadly riots and fierce political pressure at home, Palestinian leader Mahmoud Abbas responded by cancelling a planned meeting with US Vice President Mike Pence, who visited Egypt, Israel and Jordan.

Trump insisted that he could still be an honest broker.

"We have a proposal for peace. It is a great proposal for the Palestinians," Trump claimed, adding that Israel would also be forced to make concessions.

But the US president also doubled down, saying he would move the American embassy to Jerusalem as soon as next year, despite no suitably sized building existing.

"We anticipate having a small version of it open sometime next year," Trump said.

Netanyahu warmly welcomed Trump's "historic decision", saying it "recognises history, recognizes a certain reality, built on the basis of truth."

Netanyahu later said he was willing to enter talks, despite earlier dismissing the idea of the creation of a Palestinian state.

"Yes I am ready for peace, I explained that to president Trump," Netanyahu said. "I reaffirmed my willingness and Israel's willingness to engage in an effort to achieve peace with the Palestinians, an effort that is being enhanced by this very able team."

While Trump was speaking in Davos, his ambassador at the UN Nikki Haley was also turning up the heat on the 82-year-old Palestinian leader, Abbas.

Haley accused the veteran president of lacking the courage needed for a peace deal. "To get historic results, we need courageous leaders," she said.

The United States remains "deeply committed" to an Israeli-Palestinian peace deal, Haley said, "but we will not chase after a Palestinian leadership that lacks what is needed to achieve peace."

Earlier this month Abbas accused Trump of trying to make the Palestinians a scapegoat, by painting them as rejecting talks that did not exist. "Shame on you," he said.

Trump said he had not seen those remarks. "I think I'm probably better off not seeing them," Trump said.

"You know what, it's many years of killing people. It's many years of killing each other. They have to be tired and disgusted of it," he added.

© 2018 AFP