GENEVA (AP) — On Monday, the United States and China consented to significantly reduce their substantial recent tariffs, thus reviving the stalled trade relationship between the world's two largest economies and triggering a rally in global financial markets.

Despite a reduction in President Donald Trump’s trade conflicts, the fundamental disparities between Beijing and Washington remained unresolved. The 90-day agreement provides a window for American and Chinese negotiators to forge a more comprehensive accord. However, this temporary halt means tariffs are still elevated compared to levels prior to Trump's escalation last month. Consequently, businesses and investors face ambiguity regarding the longevity of this truce.

According to U.S. Trade Representative Jamieson Greer, the U.S. consented to reduce the 145% tariff enacted by Trump the previous month to 30%, while China committed to decreasing its tariff on U.S. imports from 125% to 10%.

Greer and Treasury Secretary Scott Bessent disclosed the tariff reductions at a news conference in Geneva.

Officials expressed optimism, announcing that both parties had established consultations to continue discussing their trade disagreements. Bessent stated that the tariffs exceeding one hundred percent imposed by both nations last month — an intensification of tensions initiated by Trump — were akin to “an embargo, and neither side desires that outcome. We are seeking to maintain trade.”

The United States has implemented a 30% tax on Chinese goods, which comprises a 20% duty aimed at compelling China to enhance efforts against the illicit synthetic opioid fentanyl entering the US, alongside a 10% standard tariff applied to imports from numerous other nations. This 30% tariff is in addition to existing levies on China, some of which originated during Trump's initial term and were maintained by former President Joe Biden.

Having increased the combined tariff to 145% last month in response to China's retaliation, Trump ultimately reversed the decision on Monday.

The Chinese Ministry of Commerce deemed the agreement a significant stride towards resolving the two nations' divergences, asserting it established a groundwork for subsequent collaboration.

A ministry statement asserted that this initiative aligns with the expectations of producers and consumers in both countries and advances the interests of both nations, as well as broader global interests.

The two countries released a statement saying China would also stop or get rid of other actions it took after April 2nd because of the US tariffs. China had put more controls on exporting rare earths, which are important for defense, and added more American companies to lists that limit their business with China.

Markets surge as the two parties reduce tensions.

The full effect of the complex taxes and other trade rules put in place by Washington and Beijing is still not clear. A lot depends on whether they can find ways to solve their long-term disagreements during the 90-day break.

In an interview with CNBC, Bessent stated that officials from the United States and China are scheduled to reconvene in the coming weeks.

Nonetheless, market participants celebrated as trade representatives from the world's two foremost economies reached a compromise.

Futures for the S&P 500 saw a significant surge of 2.6%, while the Dow Jones Industrial Average advanced by 2%. Concurrently, oil prices escalated by over $1.60 per barrel, and the dollar appreciated against both the euro and the Japanese yen.

Mark Williams, chief Asia economist at Capital Economics, described this as a significant de-escalation, cautioning, however, that the 90-day truce offered no assurance of evolving into an enduring ceasefire.

Dani Rodrik, a Harvard University economist, stated that both nations had averted an unnecessary trade conflict, yet highlighted that U.S. tariffs on China persist at a significant 30% and will predominantly disadvantage American consumers.

"Trump has garnered absolutely nothing from China, despite the considerable disruption he instigated," Rodrik remarked on Bluesky.

Craig Singleton, who is the senior director of the China program at the Foundation for Defense of Democracies, said that the agreement happened very quickly, which showed that both sides had more economic problems than they admitted.

"China experienced tangible economic hardship, marked by escalating unemployment, significant capital outflow, and the sharpest decline in export orders in almost two years," Singleton stated. "For Trump, financial markets held considerable sway, and this agreement affords him a victory without relinquishing his negotiating position."

Following the announcement from the U.S. and China, equities experienced a significant upward movement, with U.S. futures gaining over 2%. Hong Kong's Hang Seng index saw an increase of almost 3%, while key indices in Germany and France each rose by 0.7%.

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

"Despite this, the potential removal of U.S. tariffs, suggesting they may become substantial trade obstacles rather than insurmountable barriers, is a favourable sign for the global economy," he noted.

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

The foreman stated that he had instructed his team in China to dispatch the toy shipments, which had been held up since the beginning of April. He mentioned that prior to Monday's agreement, he had anticipated having to double the prices, although they will still increase by 10% to 15% during the third and fourth quarters.

“It’s as if they attempted to offer us something unpalatable and anticipated we would gratefully accept something equally substandard,” Foreman said.