The United States consulate building in Jerusalem is seen on March 4, 2019, the day it was officially shuttered, downgrading the status of the U.S. government's main diplomatic mission to the Palestinians by folding it into the U.S. Embassy to Israel. AP

Jerusalem -- The United States has officially shuttered its consulate in Jerusalem, downgrading the status of its main diplomatic mission to the Palestinians by folding it into the U.S. Embassy to Israel. For decades, the consulate functioned as a de facto embassy to the Palestinians. Now, that outreach will be handled by a Palestinian affairs unit, under the command of the embassy.

The symbolic shift hands authority over U.S. diplomatic channels with the West Bank and Gaza to Ambassador David Friedman. The Trump bankruptcy-lawyer-turned diplomat has made personal financial contributions to Israeli settlements in the West Bank, notes CBS "Face the Nation" moderator Margaret Brennan, which has led to strong distrust among Palestinians. Consolidating contact with the Palestinians under his control will only add to doubts that the Trump administration will be a fair broker in the long-awaited peace process being brokered by presidential son-in-law and envoy Jared Kushner.

The announcement from the State Department came early Monday in Jerusalem, with the "merger" effective the same day.

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"This decision was driven by our global efforts to increase the efficiency and effectiveness of our diplomatic engagements and operations," State Department spokesman Robert Palladino said in a statement. "It does not signal a change of U.S. policy on Jerusalem, the West Bank, or the Gaza Strip."

When first announced by U.S. Secretary Mike Pompeo in October, the move infuriated Palestinians, fueling their suspicions that the U.S. was recognizing Israeli control over east Jerusalem and the West Bank, territories that Palestinians seek for a future state.

Palestinian official Saeb Erekat called the move "the final nail in the coffin" for the U.S. role in peacemaking.

The downgrade is just the latest in a string of divisive decisions by the Trump administration that have backed Israel and alienated the Palestinians, who say they have lost faith in the U.S. administration's role as arbiter in any peace process.

Last year the U.S. recognized Jerusalem as Israel's capital and relocated its embassy there, upending U.S. policy toward one of the most explosive issues of the Israeli-Palestinian conflict. The Palestinians in turn cut off most ties with the administration.

The administration also has slashed hundreds of millions of dollars in humanitarian aid to the Palestinians, including assistance to hospitals and peace-building programs. It has cut funding to the U.N. agency that provides aid to Palestinians classified as refugees. Last fall, it shut down the Palestinian diplomatic mission in Washington.

Senior White House Advisor Jared Kushner speaks on stage as U.S. Ambassador to Israel David Friedman looks on during the opening of the U.S. Embassy in Jerusalem, May 14, 2018 in Israel. Getty

The Trump administration has cited the reluctance of Palestinian leaders to enter peace negotiations with Israel as the reason for such punitive measures, although the U.S. has yet to present its much-anticipated but still mysterious "Deal of the Century" to resolve the Israeli-Palestinian conflict.

Kushner announced last month that the U.S. would unveil the deal after Israeli elections in April. The Palestinian Authority has preemptively rejected the plan, accusing the U.S. of bias toward Israel.