Joe Biden’s bid to strike a deal with Senate Republicans on a sweeping infrastructure spending package collapsed on Tuesday, narrowing the US president’s options as he tries to push his economic agenda through Congress.

Biden had spent the past few weeks immersed in negotiations with Shelley Moore Capito, the Republican senator from West Virginia, to forge a bipartisan compromise, but the pair called off the talks after failing to reach an agreement.

The breakdown in the infrastructure negotiations highlighted Biden’s struggle to proceed with his ambitious domestic legislative agenda beyond the $1.9tn stimulus plan passed in March against strong Republican opposition in a deeply polarised political environment.

Biden’s $2.3tn infrastructure package — along with a separate $1.8tn social spending plan — is central to his hopes of reshaping the post-pandemic US economy by giving the government a bigger role in funding public goods including roads, broadband, child care subsidies and pre-school education.

The White House and Republicans remained divided over the size and nature of the infrastructure investments, as well as how to pay for the plan without adding to US budget deficits. Biden had sharply lowered his spending target and dropped his push to increase the corporation tax rate, but Republicans rejected those offers and made counterproposals that the White House found inadequate.

“[Biden] offered his gratitude to [Capito] for her efforts and good faith conversations, but expressed his disappointment that, while he was willing to reduce his plan by more than $1tn, the Republican group had increased their proposed new investments by only $150bn,” Jen Psaki, White House press secretary, said in a statement on the breakdown of the talks.

Capito said: “While I appreciate President Biden’s willingness to devote so much time and effort to these negotiations, he ultimately chose not to accept the very robust and targeted infrastructure package, and instead, end our discussions.”

The failure of the talks sets the stage for a new round of negotiations between Biden and a bipartisan group of eight moderate senators, including Joe Manchin, the West Virginia Democrat, Kyrsten Sinema, the Arizona Democrat, Mitt Romney, the Utah Republican, and Bill Cassidy, the Louisiana Republican.

The president and lawmakers will try to forge a successful compromise in the coming weeks.

Psaki said Biden would be “in contact” with the group by phone as he travels to Europe over the coming week and that he had asked aides including Steve Ricchetti, Louisa Terrell and Brian Deese to shepherd the negotiations.

Romney told reporters on Capitol Hill that his group of lawmakers were “nailing down where we are” before taking a “solidified” proposal to the larger group of 20 senators.

If those talks also collapse, Biden’s only option would be to try to pass his infrastructure spending bill with Democratic votes — a daunting task given his party’s exceedingly tight margins in both chambers of Congress.