The S&P/ASX200 rose 54.3 points, or 0.66 per cent by midday, to 8287.8, as the broader All Ordinaries lifted 64 points, or 0.76 per cent, to 8532.2.
"Markets sprung back to life with the US and China striking a tariff deal that has investors believing the worst is over and equities have room to run," Moomoo market strategist Jessica Amir said.
"In the US, the Nasdaq 100 rose 4 per cent, the S&P 500 3.3 per cent, with both jumping over their 200-day key indicators, suggesting markets will continue to charge up."
Shortly after Monday's ASX close, the US announced it would cut its tariffs imports to China to 30 per cent from 145 per cent for 90 days, while Beijing will cut its duties on US goods to 10 per cent from 135 per cent.
Both countries have agreed to cut their tariffs by 115 per cent.
Seven of 11 local sectors were trading higher, with IT stocks rallying more than four per cent and tracking with the overnight Nasdaq performance.
Electric car manufacturer Tesla, which makes more than a fifth of its earnings from China, surged 6.8 per cent overnight.
Energy stocks jumped more than three per cent after oil prices rallied on the back of the trade announcement between the world's biggest crude producers.
Brent futures have eased after spiking overnight to trade at $US64.51 a barrel.
Financials were up 0.5 per cent and the big four banks' fortunes were mixed, with Westpac up two per cent after selling off last week, and ANZ down 1.5 per cent after going ex-dividend.
The Commonwealth Bank was down slightly to $166.74, and has so far lacked the drive to push past its $169.75 peak.
Macquarie has continued on its tear upwards, surging another 4.5 per cent today to $217.10.
An improved demand outlook for China helped push materials 0.6 per cent higher, with large cap miners BHP (up 2.5 per cent), Fortescue (3.6 per cent) and Rio Tinto (2.2 per cent) trading significantly higher.
Gold sold off and weighed on miners as investor confidence improved, the precious metal is trading at around $US3,230 ($A5,070).
Health care stocks rebounded two per cent after selling off on Monday, as US President Donald Trump signed an executive order demanding pharmaceutical companies reduce medicine prices.
The order, which gave drug companies 30 days to meet price targets within 30 days, was a better result than investors had expected after Mr Trump had flagged 'most favoured' nation pricing.
The Australian dollar has lost ground against the greenback to trade at 63.75, down from 64.22 on Monday at 5pm.
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