The United States and China announced on Monday a temporary agreement to roll back most of their reciprocal tariffs, as the world's two largest economies aim to resolve a damaging trade war that has stoked fears of recession and roiled financial markets.
The U.S. will cut extra tariffs it imposed on Chinese imports in April this year to 30% from 145%, and Chinese duties on U.S. imports will fall to 10% from 125%, the two sides said. The new measures are effective for 90 days.
The dollar rose and stock markets lifted following the news, which helped allay concerns about a downturn triggered last month by U.S. President Donald Trump's escalation of tariff measures aimed at narrowing the U.S. trade deficit.
"Both countries represented their national interest very well," U.S. Treasury Secretary Scott Bessent said after talks with Chinese officials in Geneva. "We both have an interest in balanced trade, the U.S. will continue moving toward that."
Striking a conciliatory tone toward China, Bessent was speaking alongside U.S. Trade Representative Jamieson Greer after the weekend talks in Switzerland in which both sides hailed progress on narrowing differences.
"The consensus from both delegations this weekend is neither side wants a decoupling," Bessent said. "And what had occurred with these very high tariffs ... was the equivalent of an embargo, and neither side wants that. We do want trade."
The tariff dispute had brought nearly $600 billion in two-way trade to a standstill, disrupting supply chains, sparking fears of stagflation and triggering some layoffs.
The Geneva meetings were the first face-to-face interactions between senior U.S. and Chinese economic officials since Trump returned to power and launched a global tariff blitz, imposing particularly hefty duties on China.
Bessent said the deal did not include sector-specific tariffs and that the U.S. would continue strategic rebalancing in areas including medicines, semiconductors and steel where it had identified supply chain vulnerabilities.
The accord went further than many analysts had expected following weeks of confrontational rhetoric on trade.
"This is better than I expected. I thought tariffs would be cut to somewhere around 50%," said Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong.
"Obviously, this is very positive news for economies in both countries and for the global economy, and makes investors much less concerned about the damage to global supply chains in the short term," Zhang added.
Since taking office in January, Trump had hiked the tariffs paid by U.S. importers for goods from China to 145%, in addition to those he imposed on many Chinese goods during his first term and the duties levied by the Biden administration.
China hit back by putting export curbs on some rare earth elements, vital for U.S. manufacturers of weapons and electronic consumer goods, and raising tariffs on U.S. goods to 125%.
China's Commerce Ministry on Monday said the two sides agreed to cancel 91% in tariffs on each other's goods and suspend another 24% in tariffs for 90 days, bringing the total reduction to 115 percentage points.
The ministry called the agreement an important step for the resolution of the two countries' differences and said it lays the foundation for further cooperation.
"This initiative aligns with the expectations of producers and consumers in both countries and serves the interests of both nations as well as the common interests of the world," a ministry statement said.
China hopes the U.S will stop "the erroneous practice of unilateral tariff hikes" and work with China to safeguard the development of their economic and trade relations, injecting more certainty and stability into the global economy, the ministry said.
"This is a substantial de-escalation," said Mark Williams, chief Asia economist at Capital Economics. But he warned, "There is no guarantee that the 90-day truce will give way to a lasting cease-fire."
Jens Eskelund, president of the European Union Chamber of Commerce in China, welcomed the news but expressed caution. The tariffs were only suspended for 90 days and there is great uncertainty over what lies ahead, he said in a statement.
"Businesses need predictability to maintain normal operations and make investment decisions. The chamber, therefore, hopes to see both sides continue to engage in dialogue to resolve differences and avoid taking measures that will disrupt global trade and result in collateral damage for those caught in the crossfire," Eskelund said.
Shares in European firms hit by the trade war rallied after the deal. Shipping company Maersk was the biggest gainer in Europe, up more than 12%. It warned last week that container volumes between the U.S. and China had plunged due to the dispute.
Meanwhile, shares in luxury firms LVMH and Gucci-owner Kering were up 7.4% and 6.7%, respectively.
U.S. planemaker Boeing did not respond to requests for comment on how the deal would affect deliveries of aircraft to Chinese customers. In April, it said it was looking to resell potentially dozens of planes locked out of China by tariffs.
Wall Street stock futures climbed as the talks boosted hopes that a global recession might be averted.
Trump gave a positive reading of the talks before they had concluded, saying the two sides had negotiated "a total reset ... in a friendly, but constructive, manner."
The president levied the tariffs in part after declaring a national emergency over fentanyl entering the United States, and Greer said conversations over curbing the deadly opioid were "very constructive," though on a separate track.
U.S. and Chinese officials met over two days at the Swiss U.N. ambassador's gated villa overlooking Lake Geneva. Greer said many of the most challenging issues were settled outside, sitting on patio furniture beneath the shade of a tall tree.
"Having this setting, as opposed to ... a sterile hotel conference situation or conference rooms, I think, let us develop personal relationships with our counterparts and lead to the successful conclusion," he said.
