Chandler Jarrell was a mere mortal with no warrior experience. The "exchange" was a set up to kick Eddie Murphy's ass(pretty much kill him), take the dagger anyway, and kill the child. That simple.
Yes, I assumed that, too, but why should Chandler and his Chinese friends step in such a trap? That would imply, that the evil one´s think, they are very stupid.
"Hooters, hoters, yum yum yum, Hooters, hooters, on a girl that´s dumb!" The Bundy credo
At the part where Kala (the half snake woman)is telling Eddie Murphy to get the dagger, she explains the reason for this is to lure out sardo numpsa and get the child back. They know its a trap but decide to take the risk as they have no clue where the child is otherwise.