GENEVA (AP) — On Monday, the United States and China agreed to greatly lower their large recent taxes on imports and exports. This will restart trade between the world's two biggest economies, which had stopped, and caused a big increase in global financial markets.

Despite a temporary easing of tensions in President Donald Trump's trade disputes, fundamental disagreements between Beijing and Washington remained unresolved. The agreement, valid for 90 days, provided a window for U.S. and Chinese negotiators to forge a more comprehensive settlement. However, this respite also left tariffs at a higher level than before Trump's recent escalation. Consequently, businesses and investors face ongoing uncertainty regarding the durability of the truce.

U.S. Trade Representative Jamieson Greer stated that the U.S. had consented to reduce the 145% tariff, which President Trump implemented last month, to 30%. China, in turn, committed to decreasing its tariff rate on American imports from 125% to 10%.

Greer and Treasury Secretary Scott Bessent unveiled the tariff reductions during a news conference held in Geneva.

Officials were positive, saying that both sides had arranged meetings to keep talking about their trade problems. Bessent mentioned that the very high tariffs the two countries put on each other last month were like a complete ban on trade, which neither side wants, and that they do want trade.

America is currently imposing a 30% tax on Chinese goods, which comprises an existing 20% tariff designed to pressure China into taking greater action to prevent the synthetic opioid fentanyl from entering the United States, as well as the same 10% "baseline" tariff that has been applied to imports from most countries globally. This 30% tax is in addition to other levies on China, some of which were implemented during the previous administration and maintained by the current one.

Trump had escalated the combined tariff to 145% last month, enraged by China's retaliation, before relenting on Monday.

China's Commerce Ministry deemed the accord a significant stride towards resolving the two nations' disagreements and stated it establishes the groundwork for future collaboration.

"This initiative corresponds with the anticipations of producers and consumers in both nations and advances the interests of both countries, along with the shared global interests," according to a ministry statement.

The joint statement from both countries said China also agreed to stop or remove other actions it has taken since April 2 because of the U.S. tariffs. China has increased controls on exporting rare earths, including some that are very important for the defense industry, and added more American companies to its lists of companies it controls exports to and companies it doesn't trust. This limits their business with and in China.

Markets surge as two sides ease tensions

The ultimate effects of the intricate tariffs and trade restrictions imposed by Washington and Beijing are still uncertain, with their resolution largely dependent on their ability to overcome historical disagreements during the 90-day truce.

In an interview with CNBC, Bessent stated that U.S. and Chinese officials are scheduled to reconvene in the coming weeks.

Yet, investors were elated as trade representatives from the world's foremost economies yielded.

Market indicators showed significant gains, with S&P 500 futures escalating by 2.6% and the Dow Jones Industrial Average rising 2%; simultaneously, oil prices saw a sharp increase of over $1.60 per barrel, and the dollar strengthened relative to both the euro and the Japanese yen.

Mark Williams, Capital Economics' chief Asia economist, characterized this development as a significant reduction in tensions, cautioning however, that the 90-day reprieve did not assure a durable resolution to the conflict.

Dani Rodrik, a Harvard University economist, stated that both nations had retreated "from a gratuitous trade conflict", yet emphasized that US tariffs on China persist at a considerable 30% and would predominantly negatively impact American consumers.

“Despite the considerable upheaval he instigated, Trump has seemingly gained no tangible concessions from China whatsoever,” Rodrik asserted via a post on Bluesky.

Craig Singleton, senior director of the China program at the Foundation for Defense of Democracies, suggested the rapid conclusion of the agreement implied that "both parties faced greater economic constraints than they initially disclosed."

Singleton noted that China experienced significant economic hardship, grappling with increasing job losses, capital outflows, and a rapid decline in export orders, while for Trump, who prioritised market performance, this agreement represented a success that maintained his negotiating advantage.

The joint declaration from the United States and China precipitated a significant rally in equities, with U.S. futures experiencing a surge exceeding two percent, Hong Kong's Hang Seng index climbing by nearly three percent, and benchmark indices in Germany and France each advancing by 0.7 percent.

Eswar Prasad, a professor of trade policy at Cornell University, said that the decrease from very high to just high tariffs, plus the uncertainty about future tariffs, will still limit trade and investment between the two economies.

He said that it's a good sign for the world economy that U.S. tariffs might become big trade problems, but they won't be impossible to overcome.

Jay Foreman, CEO of Basic Fun, a Florida-based company known for toys like Care Bears and Tonka trucks, expressed relief that the tariff rate on Chinese goods had decreased to 30%, though he advocates for it to be reduced further to 10%.

Foreman indicated that he had recently counselled his team in China to authorise the dispatch of its toy consignments, which had been halted since the beginning of April. Prior to Monday's agreement, he stated, he had anticipated being compelled to double prices — however, they will still experience an increase, ranging from 10% to 15% for the third and fourth quarters.

"It's as if they attempted to offer us something fundamentally flawed and expected us to be content with a similarly unacceptable alternative," Foreman commented.