China鈥檚 export engine stutters as Iran war wipes out AI-driven gains
BEIJING 鈥 China鈥檚 export engine slowed in March as buyers chasing an artificial intelligence (AI)-fueled future ran into the hard reality of war in the Middle East, which has sparked an energy shock and complicated Beijing鈥檚 push to keep growth on track.
Outbound shipments from the world鈥檚 second-largest economy grew an annual 2.5%, customs data showed on Tuesday, a five-month low, and slowing from a 21.8% gain in the January-February period. They sharply undershot forecasts for 8.3% growth in a Reuters poll.
Imports rose 27.8%, the best performance since November 2021, compared with a 19.8% increase over January and February and forecasts for 11.2% growth.
March marks the first real stress test of whether enthusiasm for artificial intelligence 鈥 and the chips and servers it demands 鈥 could offset gloom unleashed by the global energy shock after Iran鈥檚 closure of the Strait of Hormuz, the strategic waterway for the world鈥檚 20% of oil and gas flows.
Natural gas imports for March dropped an annual 10.7%, the lowest level since October 2022, while crude imports fell 2.8%, with Chinese vessels also getting stuck in the Strait.
China roared into 2026 with outbound shipments far outstripping forecasts, powered by tech exports, raising the prospect it could smash last year鈥檚 record $1.2-trillion trade surplus. The Iran war casts doubts about that trajectory.
Even China, long criticized by trading partners for subsidy-backed, cut-price manufacturing, is not insulated from the hit to buyers鈥 purchasing power as fuel and transport costs rise.
Still, Chinese producers may yet gain ground as buyers seek cheaper options, said Fred Neumann, HSBC鈥檚 chief Asia economist. Decades of commodity stockpiling have also helped blunt the impact of raw material shocks on factory gate prices, he said.
China鈥檚 exports of refined oil products rose 20.5% month on month, totaling 4.6 million metric tons.
The figures were further muddied by the seasonal effects of a late Lunar New Year national holiday, said Xu Tianchen, senior economist at the Economist Intelligence Unit, during which factories shut as workers down tools to celebrate.
鈥淭his explains the decline across the low-value added sectors, textiles, garments, bags, toys, furniture, as they are reliant on migrant workers,鈥 Mr. Xu said.
A high base is also a drag, after Chinese factories rushed shipments a year earlier to beat US President Donald J. Trump鈥檚 April 2 鈥淟iberation Day鈥 tariff deadline.
South Korea鈥檚 exports to China 鈥 a bellwether for Chinese demand 鈥 rose 62.4% in March, led by a 151.4% surge in global semiconductor shipments on higher memory prices and robust AI-driven server demand.
March factory activity data out of China showed goods exports continued to support growth, but the war in Iran weighed on sentiment as commodity prices rose sharply, lifting input costs.
China鈥檚 trade surplus came in at $51.13 billion in March from $214 billion over January and February.
Mr. Trump is expected to visit China for a meeting with Chinese President Xi Jinping in May, where analysts see scope for deals on farm goods and aircraft parts but little chance of movement on flashpoints like Taiwan. 鈥 Reuters
