China’s March exports slow as Iran war wipes out gains
China’s export engine slowed in March as buyers chasing an AI-powered future faced the harsh reality of war in the Middle East; This has led to an energy shock and complicated Beijing’s effort to keep growth on track.
Outbound shipments from the world’s second-largest economy rose 2.5 percent annually, a five-month low, customs data showed Tuesday, slowing from a 21.8 percent increase in the January-February period. They fell sharply below forecasts for 8.3 percent growth in a Reuters poll.
Imports increased by 27.8 percent, the best performance since November 2021, compared to forecasts for a 19.8 percent increase and 11.2 percent growth over January and February.
March marks the first real test of whether interest in artificial intelligence (and the chips and servers it demands) can offset the gloom cast by the global energy shock that emerged after Iran closed the Strait of Hormuz, the strategic waterway for 20 percent of the world’s oil and gas flows.
China entered 2026 with shipments well above forecasts, supported by technology exports, increasing the possibility that it could break last year’s record trade surplus of $1.7 trillion. The Iran war raises doubts about this state of affairs.
Even China, long criticized by its trading partners for subsidy-supported, cut-price manufacturing, is not immune from the hit to buyers’ purchasing power as fuel and transportation costs rise.
Still, Chinese manufacturers could gain ground as buyers look for cheaper options, said Fred Neumann, HSBC’s chief Asia economist. He said decades of commodity stockpiling also helped reduce the impact of raw material shocks on ex-factory prices.
Economists were divided on how Chinese manufacturers fared in the first month under the shadow of war.
Mizuho Securities had the highest forecast, forecasting a 24 percent rise, ahead of Macquarie Group, which expected a 17 percent rise. At the other end of the scale, Citigroup is forecasting growth of just three percent.
The high base is also likely to be a drag after Chinese factories ramped up shipments a year in advance to beat U.S. President Donald Trump’s April 2 “Liberation Day” tariff deadline.
Factory activity data from China for March showed goods exports continuing to support growth, but the war in Iran weighed on sentiment as commodity prices rose sharply and input costs soared.
China’s trade surplus reached A$72.02 billion in March, up from A$301 billion in January and February.
Trump is expected to visit China in May for a meeting with Chinese President Xi Jinping; Here, analysts see scope for deals on agricultural products and aircraft parts but see little chance of movement in flashpoints such as Taiwan.
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