Geneva, Switzerland (AFP)-The United States and China announced Monday an agreement to drastically reduce tit-for-tat tariffs for 90 days, de-escalating a trade war that has roiled financial markets and raised fears of a global economic downturn.

After their first talks since US President Donald Trump launched his trade war, the world’s two biggest economies agreed in a joint statement to bring their triple-digit tariffs down to two figures and continue negotiations.

US Treasury Secretary Scott Bessent described the weekend discussions with Chinese Vice Premier He Lifeng and international trade representative Li Chenggang as “productive” and “robust”, while both sides are anticipated to meet again soon.

“Both sides showed a great respect,” Bessent told reporters.

Trump’s fresh duties on many imports from China came up to 145 percent compared to 10 percent for other countries in the global tariff blitz he launched last month.

Beijing hit back with duties of 125 percent on US goods.

The United States agreed to lower its tariffs on Chinese goods to 30 percent while China will reduce its own to 10 percent.

Bessent told CNBC Monday that he expects United States and Chinese representatives to meet again in the coming weeks to work out “a more fulsome agreement”.

While Washington does not want a broad decoupling from China, “what we do want is a decoupling for strategic necessities” the country had trouble obtaining during the Covid-19 pandemic, Bessent said.

He added to CNBC that the purpose of the 90-day pause was also to see what the United States could do about non-tariff barriers weighing on US firms.

China hailed the “substantial progress” made at the talks, which were held at the discreet villa residence of Switzerland’s ambassador to the United Nations in Geneva.

“This move… is in the interest of the two countries and the common interest of the world,” the Chinese commerce ministry said, adding that it hoped Washington would keep working with China “to correct the wrong practice of unilateral tariff rises”.

Stock markets and the dollar, which tumbled after Trump unleashed global tariffs, rallied on the announcement.

– Fentanyl ‘cooperation’ –

The US tariff rate remains higher than China’s because it includes a 20-percent levy put in place over US complaints about Chinese exports of chemicals used to make fentanyl, US Trade Representative Jamieson Greer told reporters.

“Those remain unchanged for now,” he said, adding though that “both the Chinese and United States agreed to work constructively together on fentanyl and there is a positive path forward there as well”.

In their joint statement, the two sides agreed to “establish a mechanism to continue discussions about economic and trade relations”.

“I think we leave with a very good mechanism to avoid the unfortunate escalations,” Bessent said, noting that the tariffs had essentially created a trade “embargo” between the two superpowers.

He added that “the nature of what has happened since April 2 could have been avoided if we had had this kind of mechanism in place”.

The Chinese commerce ministry said “the two sides will conduct rolling consultations on a regular or ad hoc basis in China, the US or agreed third countries”.

– ‘Uncertainties’ remain –

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note the outcome of the weekend meeting was particularly a “success” for Beijing.

“China took a tough stance on the US threat of high tariffs and eventually managed to get the tariffs down significantly without making concessions,” he said.

Wang Wen, Dean of Chongyang Institute for Financial Studies at Renmin University of China, said the agreement had “exceeded expectations”, hailing “the biggest easing of tensions… since the global tariff war” began.

He cautioned though that “uncertainties” remained, warning that without progress over the next 90 days “it is possible that the tariff war will resume”.

The trade dispute between Washington and Beijing has rocked financial markets, raising fears the tariffs would rekindle inflation and cause a global economic downturn.

The Geneva meeting came days after Trump unveiled a trade agreement with Britain, the first with any country since his flurry of new tariffs on both friend and foe.

The head of the World Trade Organization, Ngozi Okonjo-Iweala, praised the talks on Sunday as a “significant step forward”.