China's Export Growth Slows Sharply in March as Middle East Conflict Dampens Global Tech Demand
BEIJING, April 14 (Reuters) – China's export momentum weakened unexpectedly in March, with growth hitting its slowest pace in five months, as escalating conflict in the Middle East triggered an energy shock that is clouding the global economic outlook and complicating Beijing's growth stabilization efforts.
Customs data released on Tuesday showed outbound shipments rose 2.5% year-on-year in March, a sharp deceleration from the 21.8% combined growth recorded in January and February. The figure fell well below the 8.3% increase forecast in a Reuters poll. In contrast, imports surged 27.8%, the strongest performance since late 2021, handily exceeding expectations.
The data presents the first concrete evidence of how the war in Iran—and the subsequent closure of the critical Strait of Hormuz—is impacting global trade flows. The strategic chokepoint handles about 20% of global oil and gas shipments, and its disruption has sent energy prices soaring, squeezing consumer purchasing power and raising manufacturing costs worldwide.
This comes after a remarkably strong start to the year for Chinese exports, fueled largely by international demand for semiconductors and servers needed to power artificial intelligence development. That tech-driven surge had raised prospects of another record annual trade surplus. The March slowdown now casts doubt on that trajectory.
"The AI boom was providing a powerful tailwind, but geopolitics has introduced a formidable headwind," said Fred Neumann, chief Asia economist at HSBC. "While Chinese producers may benefit as buyers seek more cost-effective options, the broader demand destruction from higher energy costs is a net negative." He added that China's strategic commodity stockpiles have helped cushion some domestic price impacts.
Economists had been divided on the March outlook. Forecasts ranged from Mizuho Securities' bullish 24% projection to Citigroup's cautious 3% estimate, reflecting uncertainty over how the conflict would filter through global supply chains.
Analysts also noted that the slowdown was partly due to a high base of comparison from March of the previous year, when Chinese exporters rushed shipments ahead of a key U.S. tariff deadline.
A potential bright spot remains the sustained strength in tech-related trade. South Korea's exports to China—a leading indicator for Chinese demand—jumped 62.4% in March, propelled by a 151.4% surge in semiconductor shipments, underscoring resilient AI infrastructure investment.
China's trade surplus for March stood at $51.13 billion, down from a combined $214 billion in the first two months of the year.
Looking ahead, market attention is turning to a planned meeting in May between U.S. President Donald Trump and Chinese President Xi Jinping. Analysts anticipate discussions on agricultural and aerospace trade but see little likelihood of breakthroughs on more contentious issues like Taiwan.
Market Reactions & Analyst Commentary
Michael Chen, Portfolio Manager at Shanghai Horizon Capital: "The import number is surprisingly strong, suggesting domestic demand is holding up. The export slowdown is a clear warning sign from the global economy, not just a China story. It tells us the AI investment cycle alone can't fully inoculate trade from a severe energy shock."
Sarah Wilkins, Chief Economist at AsiaFirst Consultancy, Singapore: "This is the canary in the coal mine. Markets have been overly optimistic about 'de-coupling' growth cycles. The data shows that when a major geopolitical flashpoint disrupts energy flows, it hits global demand across the board, tech or no tech. China's policy buffers will be tested."
David Miller, independent trade analyst (formerly with a major European bank): "It's a reality check. For months, the narrative was that AI would drive a new supercycle. One regional conflict, and that narrative crumbles. It exposes the fragility of the globalized system and China's embeddedness within it. The record surplus is over—this is the start of a much rougher period."
Li Jia, manufacturing executive at a Shenzhen electronics component firm: "We felt the order slowdown in real-time last month. Clients in Europe became hesitant, citing uncertainty over shipping costs and their own sales forecasts. The AI-related orders are still there, but they're not growing fast enough to fill the gap from other sectors. It's worrying."