BEIJING, April 14 - China’s trade momentum eased in March as the global energy shock tied to conflict in the Middle East collided with earlier optimism about demand for AI-related technology equipment.
Customs figures released on Tuesday showed outbound shipments from the world’s second-largest economy increased 2.5% year-on-year in March, marking a five-month low and a sharp deceleration from the 21.8% rise recorded over January and February. The March reading fell well short of the 8.3% expansion that had been expected in a Reuters poll.
Meanwhile, imports jumped 27.8% in March - the strongest performance since November 2021 - up from a 19.8% increase over January and February and exceeding poll forecasts of 11.2% growth. The divergence between slowing exports and surging imports highlights a shifting trade dynamic in the first full month under the shadow of renewed conflict in the Middle East.
The conflict has prompted an energy shock after Iran’s closure of the Strait of Hormuz - the strategic waterway that handles about 20% of global oil and gas flows - and that shock has complicated Beijing’s effort to sustain robust economic growth. March was the first major test of whether the wave of demand for chips, servers and other hardware tied to artificial intelligence could counterbalance rising fuel and transport costs that sap buyers’ purchasing power.
China entered 2026 with outbound shipments running ahead of expectations, buoyed by technology exports, and raised the possibility that it could eclipse last year’s record $1.2 trillion trade surplus. The recent disruption in the Middle East has introduced uncertainty into that trajectory.
Even manufacturers long criticised by trading partners for low-cost, subsidy-backed production are not immune to the squeeze on overseas buyers when commodity and freight prices climb, a factor that can undermine demand. At the same time, some analysts see an opportunity for competitive Chinese producers if purchasing firms seek lower-cost suppliers amid rising input expenses.
Fred Neumann, HSBC’s chief Asia economist, noted that Chinese producers may still pick up market share as buyers look for cheaper options. He also pointed to the mitigating effect of long-standing commodity stockpiles, which have helped blunt the immediate pass-through of raw-material shocks to factory-gate prices.
Economists were split in their expectations for March trade. Mizuho Securities projected the strongest outcome, forecasting a 24% increase, followed by Macquarie Group at 17% and Citigroup at 3% growth. A high year-earlier base also likely acted as a drag, after Chinese factories accelerated shipments a year earlier to beat an April 2 tariff deadline tied to U.S. policy - referenced in market reporting as L1N3QS044.
External indicators provided mixed signals about global demand. South Korea’s exports to China jumped 62.4% in March, propelled in particular by a 151.4% surge in global semiconductor shipments driven by higher memory prices and strong AI-driven server demand.
March factory activity data from China signalled that goods exports continued to support overall growth, but the Iran conflict weighed on business sentiment as commodity prices climbed, pushing up input costs for manufacturers.
On the balance sheet, China’s trade surplus narrowed to $51.13 billion in March, following a combined surplus of $214 billion across January and February.
Looking ahead, a planned visit by former U.S. President Donald Trump to China in May for talks with Chinese President Xi Jinping has generated market discussion. Analysts expect the meeting could open opportunities for deals on agricultural products and aircraft components, though they see little prospect for movement on more contentious issues such as Taiwan.
Summary
China’s March export growth slowed to 2.5% year-on-year, a five-month low, while imports surged 27.8%, the strongest rise since November 2021. The slowdown in exports reflects the impact of an energy shock following Iran’s closure of the Strait of Hormuz, which has raised fuel and transport costs and complicated the offset from AI-driven demand for chips and servers. The trade surplus narrowed to $51.13 billion in March from $214 billion over January and February.
Key points
- Exports rose 2.5% in March - a five-month low and down from a 21.8% gain in January-February.
- Imports climbed 27.8% in March - the best performance since November 2021, outpacing forecasts.
- Sectors impacted include shipping and logistics, energy and fuels, manufacturing, and semiconductors - with AI-related server demand having previously supported export strength.
Risks and uncertainties
- Energy-price volatility linked to Iran’s closure of the Strait of Hormuz could continue to erode buyers’ purchasing power, pressuring demand in manufacturing and international shipping.
- Rising commodity and transportation input costs may weigh on factory margins and export competitiveness despite large commodity stockpiles buffering some price shocks.
- High-year-earlier shipment volumes - prompted by firms rushing to beat a tariff deadline - complicate comparisons and may obscure underlying demand trends in the near term.