- Chinese exports rose just 2.5% year-over-year in March — a sharp deceleration from January-February’s 22% pace — as the Iran war weighs on global demand
- Imports surged 28%, the fastest growth since 2021, as higher commodity prices from Middle East supply disruptions pushed up costs for energy, textiles, and materials
- China’s trade surplus collapsed to $51 billion in March — roughly half of the $103 billion posted a year ago — as the import bill ballooned
- Exports to the U.S. fell 26% and trade with the Middle East also contracted, leaving China’s manufacturers exposed on two of their biggest fronts simultaneously
What Happened?
China’s export growth slumped to just 2.5% in March from a year earlier, down sharply from the 22% pace recorded in the combined January-February period. Imports surged 28% — the fastest clip since 2021 — as higher oil and commodity prices from Middle East supply disruptions drove up costs across the economy. China’s trade surplus fell to $51 billion, roughly half of the $103 billion posted in March 2025. Trade with the U.S. continued to contract, with Chinese exports to America falling 26%. Trade with the Middle East — a growth market in recent years — also declined amid the Iran war. Some of the deceleration reflects a later-than-usual Lunar New Year, but underlying demand weakness is real.
Why It Matters?
China has leaned heavily on exports to sustain growth as its property market crisis continues to suppress domestic demand. The Iran war puts that export model at risk from multiple directions: weaker global consumer demand, elevated oil prices squeezing factory profit margins, and a U.S.-China trade relationship that keeps contracting. Factory prices in China rose in March for the first time in more than three years — a sign that imported commodity inflation is beginning to pass through the supply chain. China is more insulated from energy shocks than many Asian peers thanks to strategic oil stockpiles and renewable energy capacity, but sustained $100+ oil will eventually hit margins and order books.
What’s Next?
China’s manufacturers may find a silver lining in disrupted competitors — if elevated energy costs hurt rival exporters in Southeast Asia harder, Beijing could gain market share in key categories. Chinese EVs and solar panels are already seeing a surge of new demand as importing nations accelerate energy transition investment in response to oil price shocks. But the more durable risk is a protracted pullback in global consumer spending that reduces orders across the board. April and May trade data — free of Lunar New Year distortions — will be the clearest read yet on how much structural damage the Iran war is inflicting on China’s export engine.
Source: The Wall Street Journal
