The Americans reported the Chinese ship conducted a series of "aggressive" manoeuvres while warning the Decatur to get out of the area.
The operation also comes as military ties between the two countries have dived, with China also angered by U.S. sanctions on China's military for buying Russian arms and by United States support for self-ruled Taiwan, which Beijing claims as its own.
China's military buildup in the waterway, which has included placing airstrips, radar domes, missile systems and other military equipment on the islands, prompted Mattis in May to disinvite Beijing from participating in a multinational naval exercise in the Pacific.
The main aim of the global force showdown is to carry out a highly focused set of exercises involving United States warships, combat aircraft, and troops to demonstrate that the USA can counter any potential adversaries, CNN reported.
"Australia. played a very constructive role in all of these affairs and we'll continue to do that in a very sober, a very mature and a very measured way, in a way that would seek to de-escalate any issues rather than escalate", Mr Morrison said.
New images have revealed the tiny margin between a US Navy destroyer and a Chinese warship sent to head it off in the South China sea during a tense standoff on Sunday.
Senior Chinese officials, Mr. Pence will say, pushed business leaders to condemn US trade actions and in one instance threatened to deny a business license for a major USA corporation if it refused to speak out against US administration policies.
FEMA to test emergency alert system Wednesday
Officials estimate that upwards of 225 million Americans will receive the test alert on WEA-compatible wireless devices. Tomorrow, at around 2:18PM Eastern (11:18AM Pacific), you'll get a text message flagged as a " Presidential Alert ".
Prime Minister Scott Morrison said the nation will aim to provide a calming influence on rising tensions between China and the US.
"We would view any use of intimidation or aggressive tactics as destabilising and potentially unsafe", he told The Australian.
The China Watch supplement appeared the same week the United States slapped $US200 billion in tariffs on Chinese goods, and carried stories about China buying soy beans from South America instead of Iowa.
'It seems to me that this was deliberate and could have been sanctioned by higher levels as part of the retaliatory moves by China in recent times'.
But ties have worsened in recent weeks with a USA decision to issue economic sanctions over the purchase of Russian fighter jets and surface-to-air missile equipment.
On Monday, a U.S. defence official said that security talks due to take place later this month in Beijing between Defence Secretary Jim Mattis and his Chinese counterpart had been cancelled. In response, China summoned the American ambassador and defense attache to deliver a protest, and recalled its navy commander from a USA trip.
Last week, China abruptly canceled an annual security meeting planned for this month with Defense Secretary James Mattis in Beijing, not long after calling off trade talks in Washington.