United States President Donald Trump and China's Xi Jinping agreed on Saturday to suspend any new tariffs in the escalating trade war between the world's two largest economies, even if huge existing duties will remain in place.

Following more than two hours of dinner talks between the two leaders, the White House said an increase of tariffs from 10 to 25 per cent due to kick in on Jan 1 would now be put on hold, providing room for intense negotiations.

The agreement, hashed out over steak in the Argentine capital Buenos Aires, lowers the temperature in a conflict that has spooked world markets.

The two leaders, who were in Buenos Aires for a summit of the G20 countries, called it "a highly successful meeting", a White House statement said.

"The principal agreement has effectively prevented further expansion of economic friction between the two countries and has opened up new space for win-win cooperation," said Chinese Foreign Minister Wang Yi.

Take a look: Will Trump and Xi agree to a ceasefire in US-China trade war?

"It's an incredible deal," Trump told reporters aboard Air Force One on the flight home to Washington, adding it would have an "incredibly positive impact" on American farmers.

Partial truce

Under the agreement, Trump is shelving a plan to raise existing tariffs of 10 per cent to 25 per cent from the start of next year.

Xi avoids further immediate pressure on China's slowing economy, while Trump — scarred by last month's midterm elections that saw the Democrats regain control of the House of Representatives — can ease damage to agricultural US states that export to China, particularly soybean producers.

“China will be buying massive amounts of product from us,” Trump said after the talks.

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For Beijing-based political consultant Hua Po, “this was a rare opportunity for China” to capitalise on what they saw as Trump's compromised position after the midterms.

“At this time, it was acceptable for China to maintain some bottom lines while making some major concessions.”

But Brad Setser, a former Treasury official and now senior fellow at the Council on Foreign Relations in Washington, told Bloomberg that much remains to be done.

"The hard part is finding the basis for a real deal that settles the broader issues rather than agreeing on a pause," Setser said.

The truce is only partial.

Some $50 billion worth of Chinese imports already face 25 per cent tariffs, while the 10 per cent tariffs — which target a massive $200 billion in goods — will also remain in effect.

Meanwhile, China has targeted $110 billion worth of US imports for tariffs.

If there is any further retaliation, Trump has warned, he will slap punitive duties on the remaining $267 billion in Chinese goods coming to the US.

And Saturday's truce also contained an ultimatum.

The White House made clear that the 10 per cent tariffs would still leap up to 25 per cent if China doesn't meet US demands in 90 days.

These include China stopping a host of trade barriers, intellectual property theft and other actions that Washington say make fair trade impossible.

Tough negotiations lie ahead, but Trump was upbeat.

"This was an amazing and productive meeting with unlimited possibilities for both the United States and China," he said in a statement.

Earlier, White House top economic adviser Larry Kudlow had claimed that the meeting went "very well".

Trump and Xi, who were in the Argentinian capital over the last two days for a summit of G20 countries, had gone into the meeting in a bid to pull the world's top two economies from the brink of a full-fledged trade war.

Both leaders expressed optimism as they and top aides sat down at a long hotel table adorned with flowers.

“We will probably end up ending up getting something that will be good for China and the United States,” Trump said.

Xi stated that they shared tremendous responsibility to find a solution. “Only with cooperation between us can we serve the interest of both peace and prosperity,” he said.

The meeting, featuring a menu of sirloin steak, caramel rolled pancakes and Argentinian wine, went on longer than scheduled. And while it may have been tacked on to the end of two days of G20 diplomacy, it was in many ways the main event of the weekend.

Financial markets, spooked by the potential impact on the world economy, had hoped that at least some kind of truce could be declared.

German Chancellor Angela Merkel, also attending the G20, spoke for many when she urged progress.

“We all realise that we are indirectly influenced by the fact that Sino-American economic relations are not running as smoothly as a world order needs,” she said.

Personal chemistry factor

Both sides certainly came prepared for serious discussion. The White House released the names of the two delegations, totalling 20 people in addition to the two leaders.

On the US side, these included advisers such as Kudlow and Treasury Secretary Steven Mnuchin, who are widely seen as wanting to cut a deal, but also hawkish advisers like Peter Navarro and US Trade Representative Robert Lighthizer.

Navarro's inclusion in particular was a surprise as he has harshly criticised China, accusing its leadership of duplicity. Keen White House watchers also noted that Trump was flanked at the table by Mnuchin and his secretary of state, Mike Pompeo.

Trump, as often in his diplomatic dealings, appears to consider his personal chemistry with Xi the most important factor in the success of the negotiations.

He has prided himself on building a good relationship with the Chinese leader, even though he acknowledges it may have trouble surviving the growing crisis.

“He may not be a friend of mine anymore but I think he probably respects me,” Trump said in September.

At the dinner, however, he was more upbeat, saying that his ties to Xi were "a very primary reason" for considering a deal possible.

Beyond trade, Washington and Beijing find themselves increasingly entangled on hard-to-resolve issues. They include attempts to secure the denuclearisation of North Korea and China's increasingly self-confident expansion of military power, especially in the South China Sea.