And for now, at least, Beijing views the trade-deficit-obsessed Trump as a more pragmatic and adaptable partner to work with than the China hawks that called the shots during Trump’s first term. China’s leaders now believe they can broker a trade deal with Trump to reduce tensions.

Trump said Monday that he has cut a deal with chipmaker Nvidia, allowing it to sell certain artificial intelligence chips to China in exchange for a cut of the revenue, which would go to the U.S. government. Trump said he also negotiated a similar deal with chipmaker Advanced Micro Devices (AMD).

Favoring "deals over deterrence" will damage U.S. alliances and embolden Beijing, says Craig Singleton of the Foundation for Defense of Democracies.

The bilateral agreement to extend the temporary trade war truce this week came after a third round of negotiations framed by both sides as positive. Trump’s advisers regularly cite his “excellent” personal relationship with Xi and continue to weigh the possibility of a face-to-face meeting in China later this year.

For years, the US has restricted the sale of powerful AI chips to China. But Trump is letting sales of less-advanced chips happen.

U.S. President Donald Trump has targeted top economic rival China with a cascade of tariff orders on billions of dollars of imported goods aimed at narrowing a wide trade deficit, bringing back lost manufacturing and crippling the fentanyl trade.

Gavekal Dragonomics’ Arthur Kroeber says tariffs haven’t hurt China’s growth perceptions and Beijing won’t accept a weak U.S. trade deal leaving little scope for a trade deal between the two major economies.

Analysts fear Trump’s 15% cut of China chip sales could drive Chinese developers into the arms of Huawei. Welcome to AI Decoded, Fast Company’s weekly newsletter that breaks down the most important news in the world of AI.

Trump’s major gamble on China continues to pay off, with Chinese negotiators willing to make some concessions. Trump has maintained very high tariffs on America’s second-biggest trading partner without tipping the economy into recession.