How the Iran war upended China’s trade math in March
Shipping containers at the Yantian International Container Terminals, operated by CK Hutchison Holdings Ltd.’s Hutchison Port Holdings Trust (HPH Trust), in Shenzhen, China, on Monday, April 7, 2025. China’s policymakers discussed measures over the weekend to stabilize the economy and the markets in the face of US President Donald Trump’s tariff onslaught, including whether to accelerate plans to unleash stimulus to bolster consumption, according to people familiar with the matter. Photographer: Qilai Shen/Bloomberg
China’s export growth slowed sharply in March from previous months, reflecting intensifying strains on the world’s No. 2 economy as the war in Iran upends global energy supply.
Exports rose just 2.5% from a year earlier, according to a statement released by the General Administration of Customs on Tuesday. That compares with the median forecast of 8.6% in a Bloomberg survey of economists and a gain of almost 40% in February.
By contrast, imports surged at the fastest pace since late 2021 and rose almost 28%, leaving a trade surplus of $51 billion — the smallest in more than a year. Shipments to the US plummeted more than 26%, resuming their slump after ending a streak of double-digit declines in February.
The data caps off a wild month for global markets and economies, after the US and Israeli attack on Iran and Tehran’s retaliation spread upheaval throughout the Middle East and beyond.
Iran’s effective closure of the Strait of Hormuz pushed up the costs of materials from plastics to fibers by disrupting a major transit point for energy flows that accounts for about a fifth of the world’s oil and liquefied natural gas. Many consumer-facing Chinese factories saw profits squeezed.
Cushioning the hit from the oil crisis is a months-long boom in global AI investment. That drove a rally in memory chip prices and led to explosive export growth from Asian countries like South Korea and Taiwan.
In China, the value of integrated circuits exports surged nearly 70% in the first two months of the year, while electrical equipment soared more than 50%.
Another tailwind for Chinese exports came when the US Supreme Court’s ruling in late February struck down President Donald Trump’s tariffs issued using his emergency powers. That led to a fall in the tariffs faced by China, which at one point reached as high as 145% last year.
Those contradictory factors made predicting the precise extent of China’s trade expansion difficult. Economists’ forecasts for export growth in March ranged from a contraction of 10% to a gain of 24%. The standard deviation of the estimates — a measure of their dispersion — was the highest since April 2020, when the economy was reeling from the initial Covid outbreak.
China’s economy likely emerged from the storm with relatively little damage so far.
High-frequency data from the nation’s ports shows cargo throughput remained above its record-high levels in last year. Export orders in the official manufacturing purchasing managers’ index survey improved to the highest level since April 2024.
Economists had expected trade activities to moderate after a striking first two months of the year, when exports and imports both climbed about 20% from 2025.
A later-than-usual Lunar New Year holiday in 2026 likely reduced the number of working days in March after adding to them in February compared with 2025.
The impact of the Iran war on China’s export outlook remains uncertain.
The conflict could result in higher global demand for Chinese green products such as solar panels, at least in the short term.
Already, overseas sales of Chinese electric and hybrid vehicles doubled in March to a new record. Chinese carmakers overtook Japanese peers in Australia for the first time, and doubled their market share in the UK.
But on the other hand, elevated oil prices are set to trigger monetary tightening in some economies while hurting consumer spending around the world, a negative for Chinese factories.