The S&P/ASX200 jumped 35.5 points, or 0.43 per cent, to 8269, as the All Ordinaries gained 43.7 points, or 0.52 per cent, to 8,510.7.
The top 200 climbed as much as 0.98 per cent in early trading, but later retreated as US futures pointed lower after Wall Street's overnight rally.
"There's a high degree of positivity on the ASX, just on the basis that some pretty significant headwinds to global growth have diminished," Capital.com market analyst Kyle Rodda told AAP.
"We've underperformed the Wall Street rally, because the big driving factor behind sell off in US stocks was a loss of faith in US institutions and assets."
In the meantime, the market outlook was positive.
"If we continue to see these deals being struck and pauses being put on tariffs then the momentum is there to keep stocks rising," Mr Rodda said.
Six of 11 local sectors finished higher, led by more than three per cent gains in energy and IT stocks, which tracked with gains in the oil price and US tech stocks after tariffs were walked back.
Traditionally defensive consumer staples sold off by 2.6 per cent as investors flocked towards higher growth stocks.
The tariff agreement helped drive large cap miners higher, with BHP, Rio Tinto and Fortescue all up more than two per cent as iron ore spiked above $US100 a tonne for the second time in May.
Lithium miners also performed well, with Pilbara Minerals (+2.6 per cent) and Liontown (+3.5 per cent) posting gains.
A shift to risk-on investor sentiment weighed on gold prices, miners and explorers, but the precious metal found some support over the session to trade at $US3,260 ($A5,090) an ounce.
Fortunes were mixed at the big banks, with CBA shedding 0.6 per cent, Westpac ticking 1.8 per cent higher and ANZ down 2.4 per cent after going ex-dividend.Â
Investment and financial services juggernaut Macquarie Group rallied 3.7 per cent to $215.30, helping push the financial sector 0.1 per cent higher.
Health care stocks rebounded 1.9 per cent, eclipsing Monday's losses after US President Donald Trump's executive order to cut medicine prices was less restrictive than feared.
The Australian dollar is buying 64.13 US cents, down from 64.41 US cents on Monday at 5pm.
US consumer price index data is due overnight, but markets could look through those figures in light of the trade developments, Mr Rodda said.
Local wage price data is due on Wednesday with the unemployment print, which is expected to hold steady at 4.1 per cent and offer no surprises before the Reserve Bank's meeting next week where it is expected to cut interest rates.
"I think it'll be a formality," Mr Rodda said.
"The cut's fully priced in and we haven't seen the RBA come out and push back against it."
ON THE ASX:
* The benchmark S&P/ASX200 index finished Tuesday 35.5 points higher, or up 0.43 per cent, to 8,269
* The broader All Ordinaries as the broader All Ordinaries gained 43.7 points, or 0.52 per cent, to 8,510.7
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 64.13 US cents, from 64.41 US cents on Monday at 5pm
* 94.88 Japanese yen, from 94.44 Japanese yen
* 57.72 Euro cents, from 57.59 Euro cents
* 48.59 British pence, from 48.61 pence
* 108.80 NZ cents, from 108.74 NZ cents
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