Investing.com -- Trade tensions between the United States and its major partners have eased in recent weeks, according to UBS, offering markets some relief while leaving lingering risks from tariffs.

"Trade relations between the US and most of its major partners have improved recently, reducing the threat of a tit-for-tat tariff conflict," UBS analysts said.

They added that this was "in line with our view that cooler heads will prevail, allowing the equity rally to continue."

The U.S. has reached agreements with the European Union and Japan that cap tariffs on most goods entering the country at 15 percent, half the rate threatened earlier this year.

Talks with China are ongoing after President Donald Trump extended negotiations by another 90 days.

UBS noted that "the risk of an economic destruction cycle of retaliation between the US and its peers looks to have been averted."

Still, tariff-related uncertainty persists. UBS estimates the levies will trim U.S. GDP growth by about 1 percentage point and raise inflation by a similar margin.

The analysts also flagged risks from punitive duties imposed on Switzerland, India, and Brazil, as well as possible sector-specific tariffs on pharmaceuticals and semiconductors.

India has been hit particularly hard, with goods facing duties of up to 50 percent. A 25 percent tariff is already in effect, with the remainder scheduled to start on August 27.

UBS expects the effective U.S. tariff rate to settle near 15 percent. The bank said it is a drag but "shouldn't be enough to cause a recession or end the equity rally."

The firm recommends investors use market volatility to add equity exposure, highlighting opportunities in "transformational innovation themes, including AI, Power and resources, and Longevity."