Investors are cautiously optimistic that ongoing trade talks between the US and China will ease tensions and bring clarity to financial markets, though few expect a major breakthrough in the short term.

The high-stakes negotiations in Geneva — the first formal talks since US President Donald Trump imposed sweeping tariffs on Chinese imports on April 2 — resumed Sunday following a day of discussions.

Trump described the dialogue as a “total reset” conducted in a “friendly, but constructive” atmosphere, claiming “great progress” had been made, though he offered no details.

The talks come amid a volatile backdrop, with US tariffs on Chinese goods reaching 145%, a move widely seen as a de facto embargo, and China retaliating with up to 125% tariffs on US imports.

“This is the mother of all negotiations,” said Alejo Czerwonko, CIO for Emerging Markets Americas at UBS. “Hundreds of billions of dollars of trade are on the line.”

Despite hopeful signals, many analysts remain skeptical about a quick resolution. “We’re still doubtful that direct US-China negotiations will lead to a ‘grand compromise’,” said Thierry Wizman of Macquarie.

Markets have seen modest rebounds amid hopes of de-escalation, but analysts like Liqian Ren of WisdomTree warn that optimism may be premature. “Each side wants to see how the other copes with negative headwinds,” she said.

Investors remain watchful, hoping the talks prevent further deterioration in the world’s most critical trade relationship.