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 that would hit the world’s second-largest economy.

Instead, this week they got a clear relief. Trump ordered an investigation into U.S.-China trade, and later reiterated the threat of a 10 percent tariff related to the deadly opioid fentanyl.

The measures paled in comparison to the 25 percent tariffs announced on U.S. allies Mexico and Canada and predictions by policymakers in Beijing.

The new president has hinted at a broader deal linking the tariffs to the ownership of TikTok, the Chinese-controlled short video platform that US security hawks want to shut down.

Despite Trump’s misrepresentations and rapid reversals, these early moves have 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’s more open gambit on China followed other positive signs in recent days. Chinese President Xi Jinping spoke to top US business leaders, including Vice President Han Zheng and Trump confidant Elon Musk, who attended the US anniversary.

Xi and Trump spoke by phone over the weekend before the inauguration, their first in four years, which the US president described as “excellent” and covered “trade, fentanyl, TikTok and many other topics”.

During the campaign, Trump vowed to hit China with 60 percent tariffs before threatening 10 percent more on his first day in office to force Beijing to control fentanyl precursor drugs.

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 the tariffs to his ownership of TikTok followed surprise comments by Musk on Monday, who complained that his social media platform X was banned in China even though the former was allowed to operate in the 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 are 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 seems more open to negotiations, he says his administration is filled with China hawks.

“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 has warned that Beijing is ready if the relationship breaks 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