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Prime Minister Justin Trudeau participates in Fortune Global Forum in Guangzhou,, China, Thursday, Dec. 7, 2017SEAN KILPATRICK/The Globe and Mail

Ruling out Donald Trump's approach, Prime Minister Justin Trudeau says he favours a "two-state solution" and won't be moving Canada's embassy in Israel to Jerusalem.

Reiterating Canada's long-standing view, Mr. Trudeau said Ottawa will not recognize Jerusalem as Israel's capital, though he refrained from saying anything that could be implied as criticizing Mr. Trump for the controversial move.

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Asked to react to the Trump announcement during a news conference to wrap up his trip to China, the Canadian Prime Minister offered the sparest response to the White House's decision to move the American embassy to Jerusalem.

"We will not be moving Canada's embassy to Jerusalem," Mr. Trudeau said Thursday morning in Guangzhou, China, several hours before he was to board a plane to return home.

"Canada has a long-standing policy on the Mideast. We need to work towards a two-state solution through direct negotiations. That is why we will continue to engage constructively and substantively in the region and with our partners and friends around the world."

Jews, Muslims and Christians consider Jerusalem one of their holiest sites. In 1947, the United Nations left Jerusalem out of the plan to divide Palestine into two states, an Arab one, and a Jewish one that would become Israel. A year later, Israel annexed West Jerusalem and declared the ancient city its capital. Jordan then annexed East Jerusalem. After the 1967 war, Israel took control of all of Jerusalem.

President Trump said the move  was not meant to predetermine the boundaries of a future Palestinian state.

Mr. Trudeau's careful response is in keeping with his cautious approach to the Trump administration, which is currently threatening to throw the Canada-U.S. economic relationship into chaos by tearing up the North American free-trade agreement.

The Canadian government's official written policy on Jerusalem is that "the status of Jerusalem can be resolved only as part of a general settlement of the Palestinian-Israeli dispute," according to the Department of Global Affairs.

"Canada does not recognize Israel's unilateral annexation of East Jerusalem."

Canada was one of only 33 countries that voted for the United Nations resolution in 1947 that led to the establishment of Israel and Ottawa recognized the state shortly afterward. The Canadian embassy opened in Tel Aviv in 1953.

In 1979, then-prime minister Joe Clark announced he would move Canada's embassy to Jerusalem but abandoned the decision after a backlash.