GENEVA (AP) — The United States and China reached an agreement Monday to significantly reduce their extensive recent tariffs, thereby reviving stalled trade between the world’s two largest economies and triggering a surge in global financial markets.

Although President Donald Trump's trade disputes were temporarily paused, fundamental disagreements between Beijing and Washington remained unresolved despite the de-escalation. The initial 90-day accord offered a window for negotiators to pursue a more comprehensive settlement, but it also maintained tariffs at a higher level than prior to Trump's recent increases. This situation compels businesses and investors to navigate the persistent ambiguity surrounding the durability of the truce.

U.S. Trade Representative Jamieson Greer stated that the U.S. consented to reduce the 145% tariff enacted by Trump last month to 30%, while China committed to decreasing its import duty on U.S. commodities to 10% from 125%.

At a news conference in Geneva, Greer and Treasury Secretary Scott Bessent publicly announced the decrease in tariffs.

Officials sounded positive, saying that both sides had started talks to keep discussing their trade problems. Bessent described the very high tariffs the two countries put on each other last month – which increased the tension Trump began – as being like an "embargo." He said neither side wanted that and that they did want trade.

The 30% tax that America is now putting on goods from China includes a tax of 20% that was already there. This 20% tax was meant to make China try harder to stop the drug fentanyl from coming into the United States. The 30% tax also includes the same basic 10% tax that Trump put on goods from most countries around the world. This 30% tax is in addition to other taxes on China, including some that were kept from Trump's first time as president and were also kept by former President Joe Biden.

Trump was angry that China was fighting back, so he increased the total tariff to 145% last month before changing his mind on Monday.

China's Commerce Ministry characterised the agreement as a significant stride towards resolving the two countries' divergences and asserted that it establishes a basis for future collaboration.

According to a ministry statement, this initiative resonates with the aspirations of producers and consumers in both nations, promoting their respective interests and contributing to global common interests.

The communiqué issued jointly by the two nations indicated that China had also consented to discontinue or abolish further actions implemented since April 2, undertaken in response to U.S. tariffs.

Markets demonstrate upward trends as the two parties reduce tensions.

The ultimate consequences of the complex tariffs and trade restrictions imposed by Washington and Beijing are yet to be determined, with their resolution during the 90-day truce hinging significantly on their ability to overcome persistent disagreements.

In a CNBC interview, Bessent disclosed that U.S. and Chinese officials are scheduled to convene again within weeks.

However, investors were delighted as trade representatives from the world's two largest economies showed signs of yielding.

Futures contracts for the S&P 500 experienced a significant increase of 2.6%, while the Dow Jones Industrial Average rose by 2%. Concurrently, oil prices climbed substantially, exceeding a $1.60 per barrel gain, and the dollar strengthened against both the euro and the Japanese yen.

Mark Williams, chief Asia economist at Capital Economics, characterized this as a considerable de-escalation, though he cautioned that there was no assurance the 90-day truce would lead to a permanent ceasefire.

Dani Rodrik, a Harvard University economist, stated that the two nations had retreated "from an avoidable trade conflict" but that US tariffs on China remain elevated at 30% "and will primarily impact US consumers."

“Trump has garnered precisely nothing from China despite all the turmoil he incited. Nought,” Rodrik remarked, sharing his thoughts on Bluesky.

According to Craig Singleton, a senior director at the Foundation for Defense of Democracies focusing on their China program, the rapid conclusion of the agreement implies that both parties were in a more precarious economic situation than they publicly disclosed.

Singleton observed that China was experiencing genuine economic hardship, evident in escalating unemployment, capital outflow, and a significant downturn in export orders unprecedented in almost two years. He added that for Trump, market performance was crucial, and this agreement afforded him a triumph while preserving his negotiating advantage.

Following the announcement by the United States and China, shares experienced a significant increase, with U.S. futures rising over 2%. Hong Kong’s Hang Seng index saw a nearly 3% surge, and benchmarks in both Germany and France climbed by 0.7%.

According to Eswar Prasad, a professor of trade policy at Cornell University, 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.

However, the possibility that U.S. tariffs could become big trade barriers but not impossible walls is a good sign for the world economy, he said.

Jay Foreman, Chief Executive Officer of Basic Fun — a Florida-based firm known for toys like Care Bears and Tonka trucks — expressed his relief at the reduction of the tariff rate on Chinese imports to 30%, while advocating for a further decrease to 10%.

The foreman stated he had just instructed his team in China to dispatch the toy shipments, which had been held up since the beginning of April. Prior to Monday's agreement, he mentioned he had anticipated having to double prices, although they would nonetheless rise by 10% to 15% for the third and fourth quarters.

“It’s as if they offered us something unacceptable, anticipating our contentment with a lesser, equally undesirable alternative,” Foreman said.