GENEVA — The US and China agreed to drastically roll back tariffs on each other’s goods for an initial 90 days, de-escalating a punishing trade war and buoying global markets.

The two countries will temporarily lower tariffs on each other’s imports, according to a joint statement, released in Geneva, where US and Chinese officials negotiated over the weekend.

The agreement states that the US will reduce tariffs on Chinese goods to 30% from 145% and China will lower duties on US imports to 10% from 125%, by 14 May, for a period of 90 days.

Global stocks have risen after the US and China agreed to temporarily slash tariffs on each other's goods in a major de-escalation of their trade war.

US Treasury Secretary Scott 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."

The statement also said that the two countries “will establish a mechanism to continue discussions about economic and trade relations”, naming He Lifeng, Vice Premier of the State Council, as the Chinese representative carrying out discussions with Scott Bessent, Secretary of the Treasury, and Jamieson Greer, United States Trade Representative.

The announcement is a major step to calm trade tensions between the two countries, which were running high since President Donald Trump’s “Liberation Day” announcement of tariffs on 2 April.

“This news is undoubtedly better than investors had hoped," Lindsay James, investment strategist at Quilter said, reminding that "in the run up to these talks President Trump signaled that a tariff rate of 80% “feels about right” whilst there had been other reports that 60% might be the more likely floor. James called the agreement a significant step towards de-escalation "that will likely see a considerable proportion of trade resume, albeit at slightly higher prices."

The substantial decrease of taxes, even if temporary, has resulted in ships carrying Chinese goods left stranded in ports.

Bilateral trade between the US and China topped $660 billion (€595bn) last year, which is a little more than the nominal GDP of Belgium.

Trump’s trade war with China has also put markets and businesses on edge. It started in February when he announced a 10% levy on Chinese imports. By April, Trump ratcheted up the taxes on China to a staggering 145%. Beijing upped its tariff on American products to 125%.

Scaling back the massive taxes was a much-awaited move, “the companies involved in this trade on both sides just cannot afford waiting anymore,” economist John Gong of the University of International Business and Economics in Beijing said to AP before the agreement was announced.

Trump’s escalation sent financial markets tumbling and left US retailers warning that they might run out of goods.

Americans have come to depend on Chinese factories. They produce 97% of America’s imported baby carriages, 96% of its artificial flowers and umbrellas, 95% of its fireworks, 93% of its children’s coloring books and 90% of its combs.

US factories get significant supplies from China, too. The National Association of Manufacturers calculates 47% of US imports from China in 2023 were “manufacturing inputs’’ — industrial supplies, auto parts and capital equipment that American manufacturers used to make their own products domestically. So Trump’s tariffs risk raising costs and reducing supplies that US factories rely on, making them less competitive.

As for China, the country lowered the US share of its exports to 15% last year from more than 19% in 2018, and Beijing appeared to be confident to endure what a potential trade war could bring to its economy, including falling exports and shuttered factories.

Louise Loo, China economist at Oxford Economics, a consulting firm, said that China’s ability to reduce its dependence on the US market in recent years means “they’re probably likely to be able to find substitutes for buyers, much easier than the US side will be able to find suppliers.”

Still, China won’t emerge from a trade war unscathed either. Citing the impact of the trade war, the International Monetary Fund last month downgraded the outlook for the Chinese economy this year and next. — Agencies