The U.S. and China agreed to slash punishingly high tariffs on each other's goods, a major thaw in trade relations that resets the tone between the world's two largest economies from outright conflict to constructive engagement.

After weekend talks in Geneva:

--President Trump's "reciprocal" tariff on China will fall to 10% from 125%.

--A separate 20% tariff the president imposed over what he described as China's role in the fentanyl trade will remain.

--Beijing will cut its retaliatory levies on U.S. goods to 10% from 125%.

--The U.S. said the reductions would last for 90 days while talks continue.

The agreement lowered tariffs levels more than Wall Street expected and came after just two days of talks. U.S. stock futures, which were higher ahead of the announcement, surged. That put the S&P 500 on course to open above where it stood on April 2, when Trump's "Liberation Day" tariffs sent markets into a tailspin.

Contracts tied to the tech-heavy Nasdaq-100 rose more than 3.5%. The dollar jumped and bond yields rose. Shares of companies that had been punished by the trade war such as Amazon, Apple and Tesla rose in premarket trading.

The trade war shook businesses large and small that depend on China for goods and manufacturing. Trade between the U.S. and China has practically dried up this year, after President Trump slapped hefty tariffs on Chinese goods and Beijing hit back.

The prospect of much lower than expected tariffs and a 90-day window for further talks open the possibility that the worst damage to the economy may be averted.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

(END) Dow Jones Newswires

May 12, 2025 06:15 ET (10:15 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.