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

Despite a de-escalation in President Trump's trade wars, fundamental disagreements between Beijing and Washington remained unresolved. The 90-day agreement provided a window for U.S. and Chinese negotiators to forge a more significant pact. However, the temporary halt also left tariffs elevated compared to pre-escalation levels. Consequently, businesses and investors face uncertainty regarding the durability of this truce.

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

At a news conference held in Geneva, Greer and Treasury Secretary Scott Bessent declared the implementation of tariff reductions.

Officials expressed optimism, stating that both parties had initiated consultations to persist in debating their trade disagreements. Bessent remarked that the escalating triple-digit tariffs implemented by the two nations last month, which escalated tensions initially provoked by Trump, were akin to an "embargo, something neither side desires. We are seeking trade."

The United States is now levying a 30% tariff on Chinese goods, which comprises a current 20% tariff aimed at pressuring China to increase its efforts in preventing the synthetic opioid fentanyl from entering the US. This tariff also incorporates the consistent 10% "baseline" tariff that Trump imposed on imports from most global nations. This 30% tax is in addition to other tariffs on China, including some dating back to Trump’s initial term and maintained by former President Joe Biden.

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

The Chinese Ministry of Commerce hailed the accord as a significant move toward resolving the two nations' disputes and asserted that it establishes the groundwork for future collaboration.

The ministry stated that this initiative is congruent with the expectations of producers and consumers in both countries, serving their respective national interests and the broader global interests.

The joint communique from the two nations indicated that China also consented to suspending or rescinding other measures implemented since April 2 in retaliation for the U.S. tariffs. China has tightened export controls on rare earths, some of which are crucial for the defense sector, and expanded its export control and unreliable entity lists to include more American firms, thereby limiting their commercial interactions with and operations within China.

Markets surge as tensions between parties subside.

The complete impact of the complex tariffs and trade restrictions imposed by Washington and Beijing is still uncertain, with much contingent upon their ability to resolve long-standing disagreements during the 90-day truce.

Bessent stated in a CNBC interview that U.S. and Chinese officials are scheduled to reconvene in several weeks.

However, investors celebrated as trade representatives from the world’s leading economies relented.

Futures for the S&P 500 saw a notable increase of 2.6%, while the Dow Jones Industrial Average rose by 2%. Oil prices experienced a significant surge, climbing over $1.60 per barrel, and the dollar strengthened against both the euro and the Japanese yen.

"This represents a significant de-escalation," stated Mark Williams, chief Asia economist at Capital Economics. However, he cautioned that "there is no certainty the 90-day truce will transition into a permanent ceasefire."

According to Dani Rodrik, a Harvard University economist, both countries have retreated from an unnecessary trade conflict, although the significant 30% US tariffs on China persist and are expected to predominantly harm American consumers.

“Despite the disruption he caused, Trump gained nothing whatsoever from China,” Rodrik wrote on Bluesky.

Craig Singleton, senior director of the China program at the Foundation for Defense of Democracies, posited that the swift conclusion of the agreement indicated both parties were under greater economic constraints than they disclosed.

Singleton said that China had real economic problems, like more people losing their jobs, money leaving the country, and export orders dropping faster than in almost two years. He added that for Trump, the stock markets were important, and this deal gave him a success without losing his power.

The joint announcement by the United States and China led to a significant increase in share prices, with U.S. futures rising by over 2%. Hong Kong’s Hang Seng index experienced a nearly 3% surge, while key benchmarks in Germany and France both saw a 0.7% increase.

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

He said, "However, it's a good sign for the world economy that U.S. tariffs might end up being important trade barriers, but not impossible ones to overcome."

Jay Foreman, the 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 has decreased to 30%, though he advocates for a further reduction to 10%.

Foreman stated that he had instructed his team in China to dispatch the toy shipments, which had been held since early April. Prior to Monday's agreement, he believed he would have needed to double prices — however, they will still increase, by 10% to 15% for the third and fourth quarters.

It's like they gave us something bad and expected us to be happy with something else that was just as bad, Foreman said.