Chinese officials are ready for Donald Trump to deliver bad news upon his return to the US presidency: an immediate 60 percent tariff on exports that could deal a severe blow to the second largest world economy.

However, they received an apparent reprieve this week. Trump ordered an investigation into US-China tradeand later repeated the threat of a 10 percent tariff related to the deadly opioid fentanyl.

The threat of a 10 percent levy, which Trump has proposed would take effect on February 1, hit Chinese stocks and currencies on Wednesday. The mainland’s CSI 300 index fell 1 percent and Hong Kong’s Hang Seng retreated 1.6 percent, while the offshore renminbi was the worst performer among Asia’s major currencies, weakening 0.25 percent to Rmb7.29 to the dollar.

But Trump’s opening steps in China pale in comparison to the 25 percent tariffs he announced on US allies Mexico and Canada. He also explained a potentially wider deal linking tariffs on the ownership of TikTok, the Chinese-controlled short-video platform that US security hawks want shut down.

Despite Trump’s penchant for blunt statements and rapid course changes, this slower-than-expected introduction rekindled hopes in Beijing that negotiations might be possible to avoid second trade war. Now, the question is what kind of deal will be acceptable to both sides.

“There is a possibility that the two sides will come to an agreement – you can see that there is cautious optimism,” said Zhao Minghao, professor at the Institute of International Studies at Fudan University in Shanghai. “But we have to see if there is a good match between what Trump and Beijing can do with each other.”

Trump and Chinese President Xi Jinping holding a phone call 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”.

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

During his campaign, Trump promised to hit China with 60 percent tariffs, and again threatened an additional 10 percent to force Beijing to curb flows of precursor drugs for fentanyl.

Instead, on Monday he issued a memo ordering officials to investigate the US trade deficit and “recommend appropriate measures, such as a global supplemental tariff or other policies, to address the deficiency”.

He also asked the US Trade Representative to study Beijing’s compliance with the “phase one” deal agreed during his first term as president, and to consider additional tariffs “especially on industrial supply chains and tourism.” through third countries” – a step with potential. many more reaching implications for China.

Economists believe that part of China’s trade with the US has been shifted to third countries to avoid tariffs since the trade war of the first Trump administration. US officials must report their findings by April 1.

Although Trump signed an order allowing TikTok to operate for 75 days – a change from his first term, where he sought to ban it from the US – he also said that Beijing will allow a US entity to take over half of the company or face it. tariffs up to 100 percent.

Linking TikTok ownership rates follows quixotic words on Monday by Musk, who complained that while the former was allowed to operate in the US, his social media site X was blocked in China.

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

Chinese officials, who have long opposed the forced sale of TikTok and need to approve it, have in recent days appeared to be signaling a more hands-off approach.

“When it comes to actions such as the operation and acquisition of businesses, we believe that it should be independently decided by companies in accordance with market principles,” the foreign ministry said on Tuesday, adding that “the Chinese laws and regulations must be observed”.

Gabriel Wildau, managing director of consultancy Teneo, wrote in an analyst note that China’s leaders may “believe that a good resolution of the TikTok issue can lay the foundation for cooperation” on other issues.

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

However, economists caution that it is too early to be confident that a trade conflict can be avoided. While Trump sounds more open to dealmaking, his administration filled with Chinese hawksthey said.

“It’s more of a holding pattern for now,” said Fred Neumann, HSBC’s chief Asia economist. “It’s encouraging that we don’t see an immediate increase in tariffs and that maybe there’s room for discussions beforehand. But I think it’s a false conclusion to say that China is now completely absent on the hook.

Besides trade, Beijing may offer Trump help on other issues, such as resolving the war in Ukraine, said Wang Chong, a foreign policy expert at Zhejiang International Studies University.

Wang cautioned, however, that Beijing is ready if the relationship breaks down. Even if the US starts with a small tariff increase, it will undermine the confidence of Chinese investors. “If tariffs are imposed, China will have to fight back,” Wang said.

Additional reporting by Arjun Neil Alim in Hong Kong