Over the past year, U.S.-China relations have been tumultuous to say the least. President Donald Trump levied record tariffs on Chinese exports and China responded with its own tariffs while also halting purchases of American grown soybeans.

In a trade war that has lasted since President Trump took office this past January, the relationship between the two countries seems to be taking a turn for the better.

“Marketplace” host Kai Ryssdal spoke with Adam Posen, president of the Peterson Institute of International Economics about all things China and what can be expected from the future of the U.S. China relationship. Below is an edited transcript of their conversation.

Kai Ryssdal: Let's do a level set here, the temperature of the U.S.-China relationship today versus Jan. 21.

Adam Posen: Lot closer to normal, a lot cooler. Well, I mean, too cool is bad. Too hot is bad. It's a lot more temperate.

Ryssdal: How come? What has been happening behind the headlines that are making this all seem the way it is?

Posen: I think there are a few things going on, but they all converge. So, one thing, which was very important, was a month and a half ago or so, the members of the “We Hate China Commission,” which is the U.S.-China Security Commission, went to China. They met with everybody senior, except [President Xi Jinping], and made some constructive noises about having more military-to-military contact, having reasonable discussions about economic imbalances and what constitutes an export control that's worthwhile or not. And that laid the groundwork that Trump wouldn't get outflanked by people in Congress saying, “Oh, you have to be more harsh with China.” And then finally, we have a situation where China is dumping exports on the rest of the world. It's partly due to its own weakness, and it's not having that much effect on the U.S. at this point, because our economies have disengaged. The other point, though, is that Trump found out that he doesn't have the leverage over China that he does over others.

Ryssdal: I want to talk about that weakness domestically in China, and I want to do it on a news item that you alluded to a little bit. The news a couple of days ago was that China's trade surplus hit a trillion dollars. But that does point out some domestic weakness in that economy.

Posen: Absolutely. Generally though, you get a trade surplus, in large part, when your domestic demand is weak, when your consumers are too scared to consume or too busy saving and when you're getting low returns on your economy, so investors are not putting money in it. That's when you end up exporting more than you import, and that's what's going on in China for a few years now. Partly because of a real estate crash and partly because President Xi spooked the heck out of average Chinese with property rights being safe or not and that consumers aren't consuming. Small businesses aren't investing, and in fact, even manufacturing in China has been slowly trending down. So yeah, they got a lot of exports, and that's annoying a lot of people, but it's not a sign of robust health.

Ryssdal: With the caveat that you are an economist and not a political scientist, there is a national security thing that I want to talk about with you, and that is the news earlier this week that President Trump is going to let Nvidia sell some of its high powered, not highest powered, but some of its, you know, Grade A chips to the Chinese. And of course, that is raising national security and military concerns. Also, the president is taking 25% off the top from Nvidia on that one. So, I guess the question is twofold: What's your level of concern about national security? And also, is this another step towards state capitalism by the Trump administration?

Posen: Yeah, I'm concerned about both, Kai. As a colleague of mine at the Peterson Institute, Martin Chorzempa, has argued, and others on the inside have argued, there is a case to be made that you don't bother putting export controls on things that China can get anyway, because then you just lose the sales, but you don't really set them back. So, there's a legitimate debate about if Huawei or others can produce something similar, why not let Nvidia sell. The problem is this change in policy isn't being driven by that, it's being driven, as you indicate, by a disregard for national security rather than a balancing. If you think companies should be taxed, then tax them, but don't say, “Oh, you're going to give me a private deal because I'm interested in this particular good.” I mean, that's how third world potentates, whatever that nasty phrase Trump uses for “BLEEP-hole countries.” That's how they behave. That's not how free market economies that actually work behave.

Ryssdal: Let me get you back to the beginning and the level set and the normal-ish state of Sino-American relations right now that you posit that we're in. Is it sustainable? Do you think over the rest of this Trump term, given the president's quick to change his mind and attitude on a lot of things. But also, then over the longer term, it's not like the Chinese are going away. It's not like we're going away.

Posen: I think that's the fundamental piece of wisdom. Without sounding too either Confucian or Hamiltonian, both China and the U.S. are large, are less vulnerable to the rest of the world and to the world economy, and you just have to have a policy that reflects that reality. Now the status quo, I think, can largely persist, but it is better than provoking fights with China or trying to exert sense of we're about to lose to China, or China could be changed when neither of those is really relevant.