GENEVA (AP) — On Monday, the United States and China reached an accord to significantly reduce their substantial recent tariffs, thereby reviving suspended trade between the world's two largest economies and triggering a surge in global financial markets.

However, the lessening of tensions in President Donald Trump's trade disputes did not alleviate the fundamental disagreements between Beijing and Washington. The agreement provides a 90-day period for U.S. and Chinese negotiators to finalise a more comprehensive accord. Nevertheless, this hiatus means tariffs remain higher than they were before Trump began intensifying them last month. Consequently, businesses and investors must navigate the uncertainty surrounding the potential longevity of this truce.

According to U.S. Trade Representative Jamieson Greer, the United States consented to reduce the 145% tariff implemented by Trump last month to 30%, while China agreed to decrease its tariff on American goods from 125% to 10%.

At a press conference in Geneva, Greer and Treasury Secretary Scott Bessent declared the reduction of tariffs.

Officials sounded positive, saying both sides had started talks to keep discussing their trade problems. Bessent said the very high tariffs the two countries put on each other last month – which increased the tension Trump started – were like "an embargo, and neither side wants that. We do want trade."

The US is now putting a 30% tax on goods from China. This tax includes a 20% tax that was already there, meant to make China work harder to stop the drug fentanyl from coming into the US. It also includes a 10% basic tax, like the one Trump put on goods from most countries. This 30% tax is added to other taxes on China, including some that started when Trump was president and were kept by President Joe Biden.

Trump had raised the combined tariff to 145% last month, angered by China's retaliation, before reducing it on Monday.

The Chinese Commerce Ministry hailed the agreement as a significant stride towards resolving the bilateral disputes, asserting that it establishes a basis for enhanced future collaboration.

According to a statement from the ministry, this undertaking corresponds with the aspirations of producers and consumers in both nations and promotes their respective interests, as well as the global collective good.

The two countries released a joint statement saying that China also agreed to stop or remove other actions it has taken since April 2 because of the U.S. tariffs. China has increased control over the export of rare earths, including some that are very important for the defense industry. It has also added more American companies to its lists of companies it controls and considers unreliable, which limits their business with and in China.

Markets surge as the two parties ease tensions.

We still don't know the full effect of the difficult tariffs and other trade punishments that Washington and Beijing have put in place. A lot depends on if they can find ways to agree on their long-term differences during the 90-day pause.

In an interview with CNBC, Bessent indicated that U.S. and Chinese officials are scheduled to reconvene in a matter of weeks.

However, investors celebrated as the trade representatives from the world's two largest economies appeared to concede.

In the financial markets, S&P 500 futures saw a significant rise of 2.6%, while the Dow Jones Industrial Average climbed 2%; concurrently, oil prices experienced a considerable surge of over $1.60 per barrel, and the dollar strengthened against both the euro and the Japanese yen.

"This represents a significant easing of tensions," stated Mark Williams, chief Asia economist at Capital Economics. Nonetheless, he cautioned that "there is no certainty the 90-day cessation of hostilities will evolve into a durable peace."

According to Dani Rodrik, a Harvard University economist, the two nations have retreated from an avoidable trade dispute, although U.S. tariffs on China remain significantly high at 30% and are expected to primarily negatively impact American consumers.

Rodrik asserted on Bluesky that Trump had achieved absolutely no concessions from China despite the disruption he caused.

Craig Singleton, a senior director at the Foundation for Defense of Democracies, said the agreement happened quickly, suggesting that both sides had more economic problems than they admitted.

Singleton said that China faced real economic problems, including more people losing their jobs, money leaving the country, and export orders decreasing faster than in almost two years. He added that for Trump, the financial markets were very important, and this deal allowed him to win without losing his power.

Following the announcement by the United States and China, equities experienced a significant upward trend, with U.S. futures climbing by over 2%. Concurrently, Hong Kong’s Hang Seng index saw a rise of nearly 3%, and benchmark indices in Germany and France each registered a gain of 0.7%.

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 what tariffs will be in the future, will still limit trade and investment between the two economies.

"Despite this, the potential for U.S. tariffs to become substantial trade barriers rather than insurmountable obstacles is a favourable indicator for the global economy," he commented.

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

Foreman reported he had just instructed his team in China to dispatch their toy shipments, which had been held back since early April. Prior to Monday’s agreement, he stated, he had anticipated needing to double prices — but an increase is still planned, between 10% and 15% for the third and fourth quarters.

It's like they gave us something really bad, hoping we'd be happy with something just a little less bad, Foreman said.