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Asian markets rose on Wednesday as new tit-for-tat tariffs by China and the United States were seen as lighter than feared, while there are hopes the two sides will eventually avert a damaging trade war.
Donald Trump on Monday said he would press ahead with 10% levies on another $200bn of imports, prompting Beijing to target $60bn of US goods with five to 10% taxes.
The developments were a clear escalation in the months-long standoff between the world's top economies. But analysts said dealers had been expecting the measures and essentially took the lower rates as a positive sign.
Wall Street's three main indices rallied and Asia picked up the baton.
Tokyo rose 1.1%, with a shift out of the safe-haven yen supporting Japanese exporters, while Hong Kong was up 1.3% in the afternoon and Shanghai ended up 1.1%.
Sydney rose 0.5%, Singapore was up 1% and Taipei increased 0.9%. Wellington, Bangkok and Jakarta also posted strong gains but Seoul was flat.
"The bottom line why the market didn't react negatively was the lack of shock and awe given the tariffs were so well telegraphed," said Stephen Innes, head of Asia-Pacific trade at OANDA.
Dealers are now keeping eyeing possible talks between Washington and Beijing after US Treasury Secretary Steven Mnuchin sent an invite to avert a trade war, which many fear could destabilise the world economy.
"It's more likely that there will be some negotiated resolution coming through in the near term," George Schultze, founder and CEO of Schultze Asset Management in New York, told Bloomberg TV.
"Cooler heads will eventually prevail, because otherwise both sides are shooting themselves in the foot."
Chinese Premier Li Keqiang on Wednesday hit out at "unilateralism" during a speech at the summer session of the World Economic Forum.
He told delegates problems must be worked out through consultations, adding: "It is essential that we uphold the basic principles of multilateralism and free trade."
Li also denied accusations China was allowing its yuan currency to weaken to offset the effects of Trump's tariffs, saying "there is no evidence".
Despite the calm on markets, Innes warned of the likelihood of further upheaval.
"Despite the market taking the bluster in stride, history tells us that tariffs are detrimental for global trade and commerce," he said. "As such the current levels of market buoyancy belie the possible groundswell that could overrun markets."
On oil markets, both main contracts were flat after rallying more than 1% on Tuesday on the back of comments from OPEC kingpin Saudi Arabia that it is happy with prices rising above $80 a barrel.
On foreign exchanges, the broadly upbeat sentiment provided support to embattled high-yielding and emerging market currencies, with Indonesia's rupiah up 0.1%, the Australian dollar 0.5% higher and the Thai baht 0.1% up.
The Mexican peso was 0.4% up, Russia's rouble jumped 0.9% and the rand rallied 0.7%.
In early European trade London rose 0.2%, while Paris and Frankfurt were 0.1% higher.
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