Chinese exporters have bigger worries than tariffs as summit nears
SHENZHEN, CHINA – MAY 1: The Chinese national flag is seen in front of stacked shipping containers bearing the brands MSC (Mediterranean Shipping Company), Maersk and Hamburg Süd at Yantian Port in Shenzhen, Guangdong Province, China, on May 1, 2026.
Cheng Xin | Getty Images News | Getty Images
Chinese exporters have spent the past year scrambling to diversify away from the United States, moving their supply chains abroad and targeting new markets, including the Middle East; because punitive tariffs have disrupted business models.
Now the Iran war has put new pressure on these businesses, clogging critical shipping lines, triggering a historic energy shock and threatening an overall contraction in global demand for Chinese goods.
As US President Donald Trump and his Chinese counterpart Xi Jinping prepare to discuss business and politics this week, exporters appear less concerned about tariffs and more worried about hostilities in the Middle East.
“They all want the war to stop,” said Wang Dan, Eurasia Group’s China director, who spoke to exporters across the country. He added that when asked about their expectations from the summit, many made little mention of tariffs.
“The focus right now is on the duration of the Iran war as they are worried about orders coming from overseas markets,” Wang said. Wang said some businesses are preparing contingency plans to downsize in the second half of the year if the conflict continues.
Heading up to the summit, Beijing and Washington are likely to reaffirm their shared intention to reopen the Strait of Hormuz and restore stability in the region, said Yue Su, chief China economist at the Economist Intelligence Unit. However, Su added that maritime tensions and stop-and-go negotiations will likely prolong.
The supply chain disruption caused by the Iran war is hurting more than the erratic U.S. tariffs that exporters have been dealing with for much of last year.
Take the case of Bryan Zheng, founder and chief executive of Shenzhen-based bicycle helmet manufacturer Livall Tech. It had to rely on costly air transportation to ship products to Europe as maritime delays in the Strait of Hormuz extended shipping by approximately 50 days; It takes 30 to 40 days.
Port congestion in Asia has also caused freight rates to rise. Shanghai and Ningbo are among ports experiencing significant backlogs as labor shortages and capacity constraints slow container movement on the Asia-Europe and Mediterranean trade routes.
Rail transport, a faster and cheaper alternative, was blocked after Zheng’s smart helmets were classified as sensitive dual-use products, given the active conflict zones along the route.
Zheng said a peace deal to reopen the strait would be “a huge positive outcome for everyone” but warned that any potential ceasefire brought about by the meeting between Trump and Xi could be short-lived. By contrast, higher tariffs can be managed by passing the costs on to consumers, Zheng said.
Increasing raw material costs also began to fluctuate in industrial sectors. An index measuring the input costs of raw materials, fuel and energy in China increased by 3.5 percent in April a year ago Compared to 0.8% in March after a multi-year slump.
“Companies are much more worried about this [war] “Because it disrupts everything – all the supply chains, raw materials, oil derivatives and fertilizers in the Middle East,” said Cameron Johnson, senior partner at Shanghai-based supply chain consultancy Tidalwave Solutions. “This is a completely global issue, a much bigger issue than tariffs.”
Quiet tariff expectation
The US-China trade war, in which tariffs briefly rose to triple digits last year, forced a showdown in the supply chain and spurred many exporters into action. Building manufacturing in Southeast Asia, the Middle East and beyond. A trade truce reached between the two countries last year did little to correct this shift.
Last year, Chinese exports to the United States fell 20 percent but rose sharply elsewhere, according to data provider Wind Information; 25.8 percent increase to Africa, 13.4 percent increase to Southeast Asia, 8.4 percent increase to the European Union and 7.4 percent increase to Latin America.
China’s exports to five Gulf countries, including Iran, Saudi Arabia, the United Arab Emirates, Qatar and Kuwait, increased by 9 percent last year to $144.9 billion, almost double the level in 2019.
Expectations for tariffs have diminished ahead of the peak for exporters, who have become less dependent on the US market and are passing on the cost of already high tariffs to consumers.
“Regardless of final tariff levels, many companies have integrated workarounds to adapt to a more volatile trading environment,” Su said. But he added that the summit would give Beijing the opportunity to get a lower tariff rate by offering concessions such as increased purchases of American goods.
A US court ruling challenging Trump’s authority to impose tariffs forced him to invoke powers under Section 301, which covers unfair trade practices, to pursue the threat of tariffs. Therefore, Chinese exporters no longer seem to be counting on a return to the pre-tariff era.
“I don’t see exporters building new factories or significantly increasing U.S.-focused capacity just on the basis of hope,” said Ash Monga, founder and CEO of IMEX sourcing services in Guangdong. “We’ve learned the hard way not to be tied to a single market. We now assume friction is normal.”
