GENEVA, May 12:  US and Chinese officials said Monday they had reached a deal to roll back most of their recent tariffs and call a 90-day truce in their trade war for more talks on resolving their trade disputes.

Stock markets rose sharply as the globe’s two major economic powers took a step back from a clash that has unsettled the global economy.

US Trade Representative Jamieson Greer said the US agreed to drop its 145 per cent tariff rate on Chinese goods by 115 percentage points to 30 per cent, while China agreed to lower its rate on US goods by the same amount to 10 per cent.

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

The two officials struck a positive tone as they said the two sides had set up consultations to continue discussing their trade issues.

Bessent said at the news briefing after two days of talks that the high tariff levels would have amounted to a complete blockage of each sides goods, an outcome neither side wants.

“The consensus from both delegations this weekend is neither side wants a decoupling,” Bessent said. “And what had occurred with these very high tariff … was an embargo, the equivalent of an embargo. And neither side wants that. We do want trade. We want more balanced trade. And I think that both sides are committed to achieving that.”

China’s Commerce 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.

It added that China hopes the US 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 full impact on the complicated tariffs and other trade penalties enacted by Washington and Beijing remains unclear. And much depends on whether they will find ways to bridge longstanding differences during the 90-day suspension.

But as trade envoys from the world’s two biggest economies blinked, finding ways to pull back from potentially massive disruptions to world trade and their own markets, investors rejoiced.

Futures for the S&P 500 jumped 2.6 per cent and for the Dow Jones Industrial Average was up 2 per cent. Oil prices surged more than USD 1.60 a barrel and the US dollar gained against the euro and the Japanese yen.

Jens Eskelund, president of the European Union Chamber of Commerce in China, welcomed the news but expressed caution. The tariffs only were 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 cross-fire,” Eskelund said.

Trump last month raised US tariffs on China to a combined 145 per cent and China retaliated by hitting American imports with a 125 per cent levy. Tariffs that high essentially amount to the two countries boycotting each other’s products, disrupting trade that last year topped USD 660 billion.

The announcement by the US and China sent shares surging, with US futures jumping more than 2 per cent. Hong Kong’s Hang Seng index surged nearly 3 per cent and benchmarks in Germany and France were both up 0.7 per cent.

The Trump administration has imposed tariffs on countries worldwide, but its fight with China has been the most intense. Trump’s import taxes on goods from China include a 20 per cent charge meant to pressure Beijing into doing more to stop the flow of the synthetic opioid fentanyl into the United States.

The remaining 125 per cent involve a dispute dating back to Trump’s first term and comes atop tariffs he levied on China then, which means the total tariffs on some Chinese goods can exceed 145 per cent. (AP)