In a significant development, the United States and China have reached an agreement to substantially reduce reciprocal tariffs and implement a 90-day pause on new trade measures, aiming to ease the prolonged trade tensions between the world's two largest economies.

The agreement, announced after high-level talks in Geneva, involves reducing tariffs to a baseline rate of 10%, down from previous levels that had escalated to over 100%. This move marks a notable shift from the aggressive tariff strategies previously employed and is intended to alleviate the economic strain caused by the trade war, which had disrupted supply chains and raised concerns about a global recession.

Markets responded positively to the news, with U.S. stock futures surging and the dollar strengthening against major currencies. The S&P 500 and Nasdaq futures climbed up to 3.5%, reflecting investor optimism about the potential for stabilized trade relations.

Both nations emphasized a mutual interest in maintaining trade ties and avoiding economic decoupling. Alongside the tariff reductions, the two countries agreed to initiate a new economic dialogue forum and held constructive discussions on issues such as fentanyl control.

While the agreement has been welcomed as a positive step, analysts caution that the 90-day pause is temporary and that unresolved issues could resurface if a comprehensive deal is not reached. Nevertheless, the consensus suggests a renewed commitment to cooperative economic engagement, providing a measure of relief to investors and global markets.

This development follows a period of escalating tariffs and retaliatory measures that had brought nearly $600 billion in two-way trade to a standstill, highlighting the significance of the current agreement in potentially reshaping the trajectory of U.S.-China economic relations.