China’s hopes to avoid a trade war with Donald Trump are growing.

Chinese officials were prepared to deliver bad news when Donald Trump returned to the U.S. presidency: an immediate 60 percent tariff on exports, which would severely damage the world’s second-largest economy.

Instead, this week they got a clear relief. Trump ordered an investigation. US-China tradeAnd he later reiterated concerns about the 10 percent tariff on the deadly opioid fentanyl.

The threat of 10 percent tariffs, which Trump has hinted could take effect on Feb. 1, weighed on Chinese stocks and the currency on Wednesday. The mainland’s CSI 300 index retreated 1 percent and Hong Kong’s Hang Seng retreated 1.6 percent, while the offshore renminbi weakened 0.25 percent against a major Asian currency to Rmb7.29 to the dollar.

But Trump’s opening moves against China paled in comparison to the 25 percent tariffs he announced on U.S. allies Mexico and Canada. Also, a Connecting a wide range of potential Tariffs have been imposed on Chinese-owned short video platform Tik Tok, which US security hawks want to shut down.

Despite Trump’s misstatements and quick turnarounds, this milder-than-expected prelude has raised hopes in Beijing that negotiations to avoid a second trade war may be possible. Now, the question is what kind of compromise will be acceptable to both parties.

“There is a possibility that the two sides will reach an agreement – you can sense a cautious optimism,” said Zhao Mingao, a professor at Fudan University’s Institute of International Studies in Shanghai. But we have to see if there is a good match between what Trump and Beijing can offer.

Trump and Chinese President Xi Jinping They made a phone call He described the US president as “excellent” and covered “trade, fentanyl, TikTok and many other topics” in his first inauguration weekend in four years.

Xi also sent a top Chinese official to attend the US inauguration. Vice President Han ZhengThey met with US business leaders, including Trump loyalist Elon Musk.

During the campaign, Trump promised to hit China with 60 percent tariffs. He threatened an additional 10 percent. to force Beijing to control the flow of the pre-medication for fentanyl.

Instead, he issued a memo on Monday directing officials to examine the U.S. trade deficit and “take appropriate steps to correct the deficit, such as additional global tariffs or other policies.”

He also asked the US trade representative to study the “phase one” deal agreed during Beijing’s first term and consider additional tariffs “particularly in the case of industrial supply chains and circumvention with third countries” – a possible move. Many more-realistic implications for China.

Since the trade war started by the Trump administration, part of China’s trade with the US has been diverted to third countries to avoid tariffs. US officials are due to report their findings on April 1.

Although Trump signed an order allowing TikTok to operate for 75 days — a change from his first term and if he wanted to ban it from the U.S. — he also said Beijing should allow the U.S. entity to take half of the company. Tariff up to 100 percent.

Linking tariffs to Tiki Tok ownership followed. Special comments On Monday, Musk complained that his social media account, X, had been blocked in China, despite being allowed to operate in the former US.

A person familiar with the matter in China said Beijing could agree to sell TikTok owner ByteDance as part of a broader deal that would cover a range of issues, including trade. However, any discussions were at an early stage, the person said.

Chinese officials, who have long opposed TikTok’s forced sale and need to approve it, have appeared to indicate a more hands-off approach in recent days.

“We believe that actions such as business operations and purchases should be decided by companies based on market principles,” the Foreign Ministry said on Tuesday, adding that “China’s laws and regulations must be respected.”

Gabriel Wildau, managing director at consultancy Teneo, said in an analyst note that Chinese leaders “may believe that resolving the TikTok issue peacefully will lay the foundation for cooperation on other issues.”

“These could include tariffs, export controls and — in a dream scenario for Beijing — even US policy on Taiwan and the South China Sea,” Wildau said.

But economists cautioned that it was too early to be certain that a trade conflict could be avoided. While Trump seemed more open to negotiations, the administration was. It is filled with Chinese falconare there.

“This is more of a holding pattern for now,” said Fred Neumann, chief Asia economist at HSBC. “It’s somewhat encouraging that we don’t see immediate increases and tariffs, and that there may be room for early negotiation. But I think it would be a wrong conclusion to say that China is completely off the hook now.

Besides trade, Beijing can challenge Trump on other issues, such as the war in Ukraine, said Wang Chong, a foreign policy expert at Zhejiang University of International Studies.

But Wang warned Beijing was ready if the relationship broke down.. Even if the US starts with a small tariff increase, it will undermine investors’ confidence in China. “If tariffs are imposed, China will have to fight back,” Wang said.

Additional reporting by Arjun Neil Alim in Hong Kong