US Defence Secretary Jim Mattis inspects an honor guard during a welcome ceremony at the Bayi Building in Beijing on June 27, 2018. Mark Schiefelbein | AFP | Getty Images

WASHINGTON — While the Trump administration takes a victory lap in the wake of the new trade agreement with Canada and Mexico, relations between the U.S. and China, the world's second-largest economy, continue to intensify. In the latest sign of the increasingly fraught ties, the Pentagon has canceled Defense Secretary James Mattis' visit to China later this month, said a U.S. defense official, who spoke on condition of anonymity. For security purposes, the Pentagon does not discuss upcoming travel for the Defense secretary, which is why the visit to China, which was slated for mid-October, was unannounced. The cancellation comes on the heels of a denied port visit for the USS Wasp in Hong Kong and a scrubbed engagement with China's top naval commander. Much of the heightened tension between the two nations is growing out of the South China Sea, which is home to key trade routes – and to an increasing Chinese military presence.

Turmoil in the South China Sea

In an interview with CNBC last week, Navy Secretary Richard Spencer, the branch's top civilian, voiced concerns about China's continued militarization of the South China Sea saying the U.S. Navy will "protect the lanes of commerce at all costs." "We will ply the internationally agreed upon open spaces of the ocean with our warships at all times to make sure that our commerce and our lanes of communication are open, that is something we will always do," Spencer said. "If China comes and joins the world and recognizes international rules and international law of order, we are going to have a great relationship," he added. "If they take this position that they are going to use their laws and their understanding of how they're going to trade and protect their spaces, we are going to have to have some sort of discussion about this going forward." Over the weekend a Chinese warship had what the Pentagon called an "unsafe" encounter with a U.S. destroyer, according to a CNN report. China links its economic security closely to the hotly contested waterways in the South China Sea, since more than 64 percent of its maritime trade transited through the region in 2016. The South China Sea is also a vital trade artery for Vietnam, Japan and South Korea. Home to more than 200 specks of land, the South China Sea serves as a gateway to global sea routes where approximately $3.4 trillion of trade passes annually. The numerous overlapping sovereign claims to islands, reefs and rocks — many of which disappear under high tide — have turned the waters into an armed camp. Beijing holds the lion's share of these features with approximately 27 outposts peppered throughout. Earlier this year, China installed anti-ship cruise missiles and surface-to-air missile systems on three outposts in the South China Sea. The new coastal defense systems, coupled with electronic warfare equipment, represent significant additions to Beijing's military portfolio in one of the most contested regions in the world.

Trade war and North Korea