WASHINGTON: The United States and China announced Monday an agreement to drastically reduce tit-for-tat tariffs for 90 days, an outcome President Donald Trump dubbed a “total reset” as he said a call with counterpart Xi Jinping could soon follow.

After the first talks between Washington and Beijing since 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. The announcement sent financial markets soaring after weeks of turmoil over tariff fears, with major Wall Street indexes surging.

“Yesterday we achieved a total reset with China after productive talks in Geneva,” Trump said. “I’ll speak to President Xi, maybe at the end of the week.”

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.

Wall Street stocks surged early Monday after the United States and China sharply de-escalated their trade war that has weighed on the global growth outlook. All three major US indices rallied on the announcement, which will drastically cut the tariffs enacted between the trading partners for 90 days as negotiations continue. About 20 minutes into trading, the Dow Jones Industrial Average was up 2.5 percent at 42,263.44. The broad-based S&P 500 also gained 2.5 percent to 5,801.40, while the tech-rich Nasdaq Composite Index climbed 3.3 percent to 18,518.36.

US Treasury Secretary Scott Bessent described weekend discussions with Chinese Vice Premier He Lifeng and international trade representative Li Chenggang as “productive” and “robust” with both sides 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 this year, compared to 10 percent for other countries in a global tariff blitz launched last month.

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 broad decoupling from China, it seeks “decoupling for strategic necessities” that 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, 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 Beijing “to correct the wrong practice of unilateral tariff rises.”

The US additional tariff rate remains higher than China’s because it includes a 20 percent levy over Trump’s complaints about Chinese exports of chemicals used to make fentanyl, US Trade Representative Jamieson Greer told reporters. “Those remain unchanged for now,” he said. But “both the Chinese and United States agreed to work constructively together on fentanyl and there is a positive path forward there as well.”

In a 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.

China’s commerce ministry said both parties “will conduct rolling consultations on a regular or ad hoc basis in China, the US or agreed third countries.”

Separately, Trump said Monday he would slash drug prices by 59 percent, a day after he unveiled a new policy on pharmaceuticals in the United States. "DRUG PRICES TO BE CUT BY 59 percent, PLUS! Gasoline, Energy, Groceries, and all other costs, DOWN. NO INFLATION!!!" Trump posted on his Truth Social platform. The announcement came after the president said Sunday he planned to sign an executive order that would reduce US prescription drug prices "almost immediately" by between 30 and 80 percent.

He added that he would sign the executive order bringing the new policy into effect at 9:00 am (1300 GMT) on Monday.

Trump said he planned to institute a "MOST FAVORED NATION'S" policy that pinned the cost of drugs sold in the United States to the lowest price paid by other countries for the same drug. The reduction in prescription drug costs in the United States would, he added, be counterbalanced by higher costs in other countries.

"Most favored nation" status is a World Trade Organization rule that aims to prevent discrimination between a country and its trading partners, leveling the playing field for international trade. This is not the first time that Trump has attempted to lower US drug prices.

During his first 2017-2021 term in office, he announced a similar proposal to cut US drug prices but his plans failed in the face of strong opposition from the pharmaceutical industry. Last month, the US president signed an executive order aiming to lower crippling drug prices by giving states more leeway to bargain-hunt abroad and improving the process for price negotiations. – AFP