China's March exports slow as Iran war wipes out AI-driven gains

China's export engine slowed in March as buyers chasing an AI-fuelled future ran into the hard reality of war in the Middle East, which has sparked an energy shock and complicated Beijing's push to keep growth on track.

Outbound shipments from the world's 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 test of whether enthusiasm for artificial intelligence - and the chips and servers it demands -could offset gloom unleashed by the global energy shock after Iran's closure of the Strait of Hormuz, the strategic waterway for the world's 20% of oil and gas flows.

China roared into 2026 with outbound shipments far outstripping forecasts, powered by tech exports, raising the prospect ⁠it could ‌smash last year's record $1.2 trillion trade surplus. The Iran war casts doubts about that trajectory.

Even China, long criticised by trading partners for subsidy-backed, cut-price manufacturing, is not insulated ⁠from the hit to buyers' purchasing power as fuel and transport costs rise.

Still, Chinese producers may yet gain ground as buyers seek cheaper options, said Fred Neumann, HSBC's chief Asia economist. Decades of commodity stockpiling have also helped blunt the impact of raw-material shocks on factory gate prices, he said.

Economists had been divided on how Chinese producers fared in the first full month under the shadow of war. Mizuho Securities had the highest forecast, projecting a 24% rise, ahead of Macquarie Group, which expected a 17% increase. At the other end of the scale, ‌Citigroup forecast growth of just 3%.

A high base is also likely to be a drag, after Chinese factories rushed shipments a year earlier to beat U.S. President Donald Trump's April 2 "Liberation Day" tariff deadline.

South Korea's ⁠exports to China - a bellwether for Chinese demand - 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's trade surplus came in at $51.13 billion in March from $214 billion over January and February.

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.