China Exports Show Signs of Slowing Amid Global Uncertainty
China’s export growth likely cooled in March as strong demand driven by artificial intelligence faced increasing pressure from geopolitical tensions in the Middle East. The ongoing Iran conflict has triggered an energy shock, reviving market fears reminiscent of past Gulf crises.
Export Growth Slows After Strong Start to 2026
Exports from the world’s second-largest economy are expected to have increased by 8.6% year-on-year in dollar terms, according to a Reuters poll. While still positive, this represents a significant slowdown compared to the robust 21.8% growth recorded in January and February.
AI Boom Tested by Energy Shock
March represents a critical test for whether the AI-driven surge in demand for semiconductors and servers can offset the negative impact of rising energy costs. Iran’s closure of the Strait of Hormuz—through which around 20% of global oil and gas flows—has intensified concerns over supply disruptions and higher costs.
Strong Momentum Faces New Risks
China entered 2026 with strong export momentum, largely supported by technology shipments. This raised expectations that the country could surpass last year’s record $1.2 trillion trade surplus. However, the escalation of the Iran war is now casting doubt over that outlook.
Rising Costs Impact Global Demand
Despite its competitive manufacturing base, China is not immune to rising global costs. Higher fuel and transportation expenses are reducing purchasing power among international buyers, potentially weighing on demand for Chinese goods.
Potential Competitive Advantage for Chinese Producers
Some analysts suggest Chinese exporters could still benefit from the situation, as global buyers may shift toward lower-cost suppliers. According to HSBC, China’s long-standing strategy of stockpiling commodities has also helped cushion the impact of rising raw material prices on production costs.
Diverging Forecasts Highlight Uncertainty
Economists remain divided on the strength of China’s export performance in March. Mizuho Securities projected a strong 24% increase, while Macquarie estimated a 17% rise. In contrast, Citigroup offered a much more cautious outlook, forecasting growth of just 3%.
Base Effects Add Downward Pressure
A higher comparison base may also weigh on current data, as Chinese manufacturers accelerated shipments last year to avoid tariffs introduced under U.S. President Donald Trump’s “Liberation Day” trade measures.
Imports and Regional Trade Signals
China’s imports are expected to have risen 11.2% in March, down from a 19.8% increase in the first two months of the year. Meanwhile, South Korea’s exports to China surged by 62.4%, driven by a sharp rise in semiconductor shipments and strong AI-related demand.
War Weighs on Business Sentiment
Recent factory activity data indicates that while exports continue to support economic growth, the Iran conflict is negatively affecting business sentiment. Rising commodity prices are increasing input costs, adding further pressure on manufacturers.
Trade Surplus Expected to Narrow
China’s trade surplus is projected to decline to $108 billion in March, compared to $214 billion recorded in January and February, reflecting slower export growth and shifting trade dynamics.
Geopolitical Developments in Focus
Looking ahead, U.S. President Donald Trump is expected to visit China in May for talks with Chinese President Xi Jinping. While discussions may lead to agreements in areas such as agriculture and aviation, deeper strategic tensions—particularly over Taiwan—are likely to remain unresolved.
