Global markets breathed a sigh of relief as China and the US agreed to put on hold fresh tariffs in a deal that keeps their trade war from escalating. The nations decided to iron out differences within 90 days by holding talks.

US President Donald Trump told his Chinese counterpart Xi Jinping on December 1 during talks in Argentina on the sidelines of the G-20 summit that he would not hike tariffs on $200 billion of Chinese goods to 25 per cent on January 1 as previously announced.

In return, Beijing agreed to buy a “substantial” amount of agricultural, energy, industrial and other products, the White House said.

The two countries will hold talks in a bid to address trade issues, including technology transfer, intellectual property, non-tariff barriers, cyber theft and agriculture, it said.

If no deal is reached within 90 days, both parties agreed that the 10 per cent tariffs will be raised to 25 per cent, the White House said.

Trump imposed 10 per cent tariffs on $200 billion worth of Chinese goods in September. China retaliated with its own tariffs.

Trump has also threatened to slap tariffs on another $267 billion worth of Chinese imports, as the relationship appeared set to worsen in the weeks ahead of the Argentina meeting.

As part of the deal, China agreed to start buying agricultural products from US farmers.

Speaking to reporters on Air Force One, Trump hailed his agreement with Xi. “It’s an incredible deal. What I’d be doing is holding back on tariffs. China will be opening up. China will be getting rid of tariffs,” he said.

He said under the deal China would buy a “tremendous amount of agricultural and other products” from the US. “It will have an incredibly positive impact on farming.”

Wang Yi, the Chinese government’s top diplomat, said the two sides believed the agreement “effectively prevented the expansion of economic frictions between the two countries”. “Facts show that joint interests between China and the US are greater than the disputes, and the need for cooperation is greater than frictions,” he said.

US companies and consumers are bearing part of the cost of the US tariffs on China by paying higher prices for goods, and many companies have increased prices of imported goods. At the same time, US farmers have been hurt by reduced Chinese imports of soybeans and other products.