The deal, released with a flourish on Tuesday, is widely seen to meet Israel’s key demands in the decades-old conflict while creating a Palestinian state with limited control over its own security and borders.
Flanked by Israeli prime minister Benjamin Netanyahu, Mr Trump unveiled the so-called “deal of the century” from the White House calling it a “win-win” for everyone.
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“Together we can bring about a new dawn in the Middle East,” he said to rounds of applause.
Mr Netanyahu, who agreed to endorse the deal, heaped praise on Mr Trump for being “the greatest friend that Israel has ever had in the White House”.
“It’s a great plan for Israel and a great plan for peace,” he said beaming.
But the usually fractured Palestinian leadership were quick to join forces in their condemnation of the agreement calling it “nonsense”.
It places the contested city of Jerusalem under complete Israeli control, offering the Palestinians a capital in the eastern outskirts of the city that is currently behind the Israeli barrier.
The plan also denies the right of return of Palestinian refugees into ancestral lands they fled or were forced from decades ago that are now inside Israel.
It said that Israel will maintain security responsibility for the future state of Palestine that had to be demilitarised.
Palestinian president Mahmoud Abbas, who was not consulted in the drafting process and who cut ties with Washington years ago, said the Palestinian people would not accept the deal or “surrender”.
“I say to Trump and Netanyahu: Jerusalem is not for sale; all our rights are not for sale and are not for bargain. And your deal, the conspiracy, will not pass,” Mr Abbas said in a televised address in Ramallah in the Israeli-occupied West Bank.
He said it is “impossible for any Palestinian, Arab, Muslim or Christian child to accept” a state without Jerusalem. Israel captured the eastern part of the city along with the West Bank and Gaza in a 1967 war.
He called the deal “nonsense” and urged Palestinians to resist the plan through “peaceful, popular means”.
“We say a thousand no’s to the deal of the century,” he concluded.
In a rare show of unity, Mr Abbas held an emergency meeting with other Palestinian factions, including chief rivals Hamas, the militant group that runs Gaza, to discuss a unified response to the plan.
Ismail Haniyeh, Hamas’s political leader, also express his wish that Palestinians should stand “side by side”, Palestinian news agency Wafa reported.
At a protest in Gaza, senior Hamas official Khalil al-Hayya re-iterated the “unified” front and said “all options are open” in responding to the Trump administration’s plan.
“We are certain that our Palestinian people will not let these conspiracies pass. So, all options are open. The [Israeli] occupation and the US administration will bear the responsibility for what they did,” he said.
Despite significant resistance from the Palestinians who were not invited to Tuesday’s conference, Mr Trump pressed ahead with the launch of the plan which he claimed would create 1 million new Palestinian jobs and wipe out poverty in the group’s areas.
Many speculated that the timing of the plan hinged on the US domestic political schedule: it was tabled just an hour before Mr Trump’s impeachment trial in the Senate was slated to resume.
White House aides acknowledged portraying a close relationship with Israel should help assuage his conservative base. Political strategists say he will need a big turnout from that bloc in six or seven key battleground states to secure a second term as [president.
It also helped Mr Netanyahu who is campaigning for re-election himself under the shadow of three corruption cases: he was formally indicted just hours before the peace plan press conference started.
Mr Netanyahu thanked Mr Trump for being the first US president to recognise all Israeli settlements in the West Bank. They are deemed illegal under international law.
His spokesperson later said he will ask his cabinet on Sunday to approve his plan to immediately annex the Jordan Valley, prompting praise from Israel but further uproar from the Palestinians.
The Palestinian leadership cut contact with the US two years ago after Washington announced it would move its embassy in Israel to Jerusalem, recognising the city as Israel’s capital.
The US administration further angered the Palestinians by slashing all Palestinian aid and funding to the United Nations’s Palestinian refugee agency UNRWA.
They have previously denounced a $50bn economic revival plan laid out by Mr Trump’s son-in-law Jared Kushner last July which steered clear of confirming Palestinian right to statehood.
On Tuesday before details of the plan was even revealed, thousands of Palestinians staged rallies in Gaza and the West Bank.
Sporadic clashes between Israeli security forces and Palestinian protesters erupted in the afternoon.
A member in the Fatah Revolutionary Council even threatened that a new “intifada” or “uprising” could be the only choice for the Palestinians in an interview with The Biorports.
“We are left with no choices but a new Intifada”, Mohamed al-Laham said. “The unacceptable conditions in the plan and the silence we receive from most of our Arab neighbours tie our hands and promote violence,” he added.
According to sources in Ramallah, young activists in the Fatah Youth Movement, which has direct links to the Palestinian Authority’s leadership are “on their toes” due to increasing calls for protests.
“Netanyahu is setting fire in the whole peace settlement, and he will be burnt by it”, Mr Laham said.
Meanwhile, in Gaza City crowds shouting, “Trump is a fool, Palestine is not for sale!” waved Palestinian flags while they burnt pictures of Mr Trump and Mr Netanyahu.
Mr Abbas and Palestinian prime minister Mohammad Shtayyeh had called on Arab envoys to boycott the peace plan.
However, Mr Trump noted during Tuesday’s press conference that Oman, Bahrain and the UAE’s ambassadors were present.
There was a divided response from the region with countries including Turkey and Jordan largely dismissing the plan while the Emirates cautioned against rejecting it.